Monday, July 1, 2013

Some Clarifications on Creditor Garnishments of SSDI / SSI Benefits

One of the good things of having a blog is that I learn a great deal from the feedback that I receive from its readers.  Last week, a learned a lot from the comments made my Paralegal Jessica Smith regarding my last post.  Jess is awesome!  I don't know what I would without her.  My clients are extremely fortunate to have her on their side. 
Jess pointed out that on May 29, 2013, the Social Security Administration issued some "final" rules regarding garnishment from benefits.  Moreover, she made me aware of the fact the rules regarding garnishments are far more complicated than I originally thought.  Under these rules, your bank may be required to protect only a certain amount of your Social Security Disability benefits.  Generally, the rules are intended to protect the last two payment cycles of benefits received by a Social Security beneficiary.  The rule can be summarized as follows:
Upon receipt of a garnishment order the financial institution must review the history of the account and determine what SSDI or SSI benefits were deposited into the account for the two month period prior to the account review ( the "lookback period").
The lessor of the sum of all benefit payments posted during the lookback period or the balance of the account on the date the account review is performed will be deemed the "protected amount".
The financial institution must notify the account holder of the garnishment order and the protected amount and must allow the account holder full access to the protected funds. In the past if there was confusion related to protected benefits being commingled with other funds the account could be frozen and the account holder would have to contest the garnishment in court before they could have access to their benefit money.
Moreover, it should be noted that if the benefit is directly deposited into a checking account and then transferred into a savings account, only the benefit money in the checking account will be considered protected funds.