New Rule Protecting Federal Benefits from Creditors Now in Effect

1:26 pm Uncategorized

money chained New Rule Protecting Federal Benefits from Creditors Now in EffectA new federal rule that restricts the ability of creditors to seize funds from federal exempt benefits held in bank accounts went into effect as of May 1, 2011.  The protected federal exempt benefits include:

  • Social Security
  • Social Supplemental Income (SSI)
  • Veterans Benefits
  • Railroad Retirement and Railroad Unemployment Benefits
  • Federal Employee Retirement Benefits

The new rule does not protect military pay or retirement benefits, Coast Guard payments or other federal agencies.  In addition, garnishment orders from the federal government or state child support enforcement agencies are not covered by the rule.

According to the National Consumer Law Center, if a bank receives a garnishment order, the bank will be required to determine whether an account contains electronically deposited federal benefit payments.  If so, the bank is obligated to protect two months of those payments from seizure to satisfy garnishment orders.

To protect funds deposited before the two-month time period, or deposited by check, the recipient will have to follow the state procedure for claiming exemptions.

The new rule preempts weaker state laws on garnishment of federal exempt benefits, and honors stronger state laws – like those in California, which protects up to $2,700 of direct deposited Social Security benefits from garnishment by creditors.

Contact our California asset protection law firm to learn more about California asset protection strategies to help you preserve and protect your estate.

Contact us today for individualized planning strategies to meet your unique needs.

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