In most situations, federal benefits, like social security and disability income, are exempt from garnishment actions for debts you owe. Some protections are automatic, but some aren’t. If you receive federal benefits and are facing a garnishment action, here are the important facts you need to know:
Federal Benefits Exempt from Garnishment include:
Social Security benefits
Supplemental Security Income (SSI) benefits
Civil service and federal retirement and disability benefits
Military annuities and survivor benefits
Federal student aid
Railroad retirement benefits
If the courts send your bank an order for garnishment, federal benefits are automatically protected if they were received by direct deposit. Your bank is required to look back 60 days from the day they receive the garnishment order and add up all federal benefits received by direct deposit. Any other funds can be seized by the courts, but the federal benefits will remain in your available balance.
IMPORTANT… There are two cases when federal benefits ARE NOT automatically protected from garnishment:
1. If you receive your federal benefits by paper check, YOU must alert your bank and the courts that your account contains federal benefits that are exempt from garnishment.
2. If you receive your federal benefits by direct deposit and then TRANSFER them to another account, protection is not automatic. It is up to YOU to alert all parties involved that your account contains exempt federal benefits.
One of the safest ways to protect your federal benefits from garnishment is to have them deposited onto a prepaid debit card.
No matter how you receive your federal benefits, ALWAYS respond to legal notices from courts or debt collectors. Failure to do so results in a default judgment, putting your benefits at higher risk.
Regardless of how well protected your federal benefits may be, they can still be garnished if you owe back taxes, child support, or alimony.