Protect your Social Security benefits from garnishment by creditors
A new law will require all Social Security benefits to be accepted by electronic deposit into a bank account - no more paper checks.About 85 percent of federal benefit recipients already receive their benefits electronically. A new law requiring Social Security benefits to be received electronically will apply to new enrollees beginning March 1, 2011. Existing recipients will have to switch from paper checks to electronic deposits by March 1, 2013. Senators Herb Kohl, Wis, and Max Baucus, Montana, have introducted a bill to stop the new law until stronger protection is established against garnishments and freezing of accounts, but there is no guarantee the postponement will happen.
Suggestions to Help Protect Your Social Security Benefits/SSI Payments From GarnishmentThe main reason banks allow garnishment of accounts into which Social Security benefits are deposited is that the benefits are commingled with funds from other sources making it impossible for the banks to know how much money in the account is exempt from being garnished, and how much should be paid to creditors. Joint accounts make the situation even more complicated.
To protect your Social Security/SSI, open a separate bank account and have your benefits routed to that account. Do not deposit any other funds into that account. This will make it easier for you to challenge a garnishment action against your account.
Another new option provided by the Social Security Administration is to open a Direct Express debit card. You can use the debit card at any place that accepts Mastercard credit cards. The basic card has no service fees, but there are fees for ATM withdrawals, getting a monthly statement, transferring funds to a bank account, etc. See link below to SSA.gov.
Exceptions to the rule against garnishment of Social Security Benefits/SSI paymentsThere are some exceptions to the rule against garnishments of Social Security benefits/SSI payments. Federal benefits are allowed to be garnished for the collection of child support, maintentance/alimony, and taxes.