Exempt funds

[OHBOY]

[QUOTE=WhatMoney;496878]The reason your neighbor had his SS disability garnished and frozen by the bank is that there is no "protected funds" law in WA. His funds were exempt but not protected, and so he must go through the normal process for getting exempt funds released.

Even in a state where there are no laws that require banks to protect exempt funds, he could have prevented any delays in getting the funds. He would first have to have set up a Social Security deposit account ONLY, with NO other deposits, or even interest payments. Then he would need notify the bank, in person and with a letter informing them that this was a Social Security exempt deposit account. This letter, or form would need to be signed by a bank official and placed in his account record.

Then, if the bank froze his funds there would be no excuse for the bank to not release his funds without a court order. This can often be done by the bank manager with a phone call to the sheriff and judgment holder attorney. I have seen funds frozen on Friday, and released on Monday. And this was before there were any laws requiring banks to protect funds in Oregon. Remember the bank has 10 days in most states before they must turn the funds over to the sheriff or creditor. That is plenty of time to reverse any freezing of exempt funds.

The problem I suspect is your neighbor took none of these pro-active measures to protect his account. And if he waited beyond the 10 day deadline to respond it becomes more difficult to get the creditor to return the funds. Even if you are just going through the usual exemption form process with the court, you must act quickly. In most cases, once the judgment attorney is informed by the bank that your funds are exempt, he will cancel the garnishment, and the bank will release the freeze. But the best policy is to get the bank to agree in advance to protect funds as I've suggested above. Almost no one on Social Security does this, and so they get screwed.

__________________________________________________ _______________________

Wonder if all of this would also apply for IRA exempt funds that are held in a brokerage account...?

[WhatMoney]

GoingDown: Thanks, that's what I will do. BTW, my neighbor who is on Social Security disability just got his checking account garnished by a three year old debt. Now he is fighting with the bank to get it back and they charged him a $50 fee for this so far. The bank says "yes" it is protected funds but they must go by the court order, so it will take a few weeks to get to the bottom of this. Paper checks to my home look better all the time.

The reason your neighbor had his SS disability garnished and frozen by the bank is that there is no "protected funds" law in WA. His funds were exempt but not protected, and so he must go through the normal process for getting exempt funds released.

Even in a state where there are no laws that require banks to protect exempt funds, he could have prevented any delays in getting the funds. He would first have to have set up a Social Security deposit account ONLY, with NO other deposits, or even interest payments. Then he would need notify the bank, in person and with a letter informing them that this was a Social Security exempt deposit account. This letter, or form would need to be signed by a bank official and placed in his account record.

Then, if the bank froze his funds there would be no excuse for the bank to not release his funds without a court order. This can often be done by the bank manager with a phone call to the sheriff and judgment holder attorney. I have seen funds frozen on Friday, and released on Monday. And this was before there were any laws requiring banks to protect funds in Oregon. Remember the bank has 10 days in most states before they must turn the funds over to the sheriff or creditor. That is plenty of time to reverse any freezing of exempt funds.

The problem I suspect is your neighbor took none of these pro-active measures to protect his account. And if he waited beyond the 10 day deadline to respond it becomes more difficult to get the creditor to return the funds. Even if you are just going through the usual exemption form process with the court, you must act quickly. In most cases, once the judgment attorney is informed by the bank that your funds are exempt, he will cancel the garnishment, and the bank will release the freeze. But the best policy is to get the bank to agree in advance to protect funds as I've suggested above. Almost no one on Social Security does this, and so they get screwed.

There are laws on the books in Oregon, California, and New York (that I know about) that specifically allow banks to refuse garnishment orders for exempt funds and protect the banks against legal liability. Since this has been a national issue for at least 4 years, eventually there may be Federal banking laws that force banks to protect exempt funds from garnishment. Of course the odds of this consumer protection decreases as more Republicans get elected to Congress - and if the Administration turns Republican next election, you can forget about federal consumer protection.

[GoingDown]

Yes, this is what I have heard over and over from many different people about supposedly exempt funds being seized in checking accounts.

The wages are exempt, but once they hit a checking account, they can be attacked by judgment creditors. And the bank won't be on your side. They will follow the court order for garnishment, until you get a judge to decide that these funds are exempt, and meanwhile you have no access to them, and the bank fees begin to mount up.

Moderators: Why don't we make this a "sticky" because this question keeps getting asked over and over again in the Collections forum? Okay?

[DYLAN150]

GoingDown: Thanks, that's what I will do. BTW, my neighbor who is on Social Security disaiblity just got his checking account garnished by a three year old debt. Now he is fighting with the bank to get it back and they charged him a $50 fee for this so far. The bank says "yes" it is protected funds but they must go by the court order, so it will take a few weeks to get to the bottom of this. Paper checks to my home look better all the time.

[GoingDown]

My guess is that they don't have access to Direct Express Card information because, like I said before, this is not a checking account, and will not be treated the same way as a checking account.

I have yet to hear of a judgment creditor seizing a pre-paid debit card, because their usual methods for finding checking accounts simply does not work with pre-paid debit cards.

Just like skip-tracers have a difficult time finding pay as you go cell phone numbers of debtors because the usual methods don't work with them. They aren't like a landline phone, nor are they like a contract cell phone.

About the only way they could find out such information would be to do a Debtor's Exam [which is extremely rare], and at that time you might tell them about it, but also at that time, they would have to know that the money on the card is from S.S., and so it is exempt from garnishment.

That being said, I would still not keep more money than what is necessary to pay utility bills and make online purchases. I would withdraw the rest each month promptly, so that if the worst case [and very unlikely] scenario did happen, they wouldn't get very much of your money. The other reason I would do that is because, just like all debit cards and credit cards, things like theft, identity theft and credit card (or debit card) fraud can occur, and while you are waiting for VISA or MasterCard to investigate the fraud and then restore your balance to your card, you won't have access to it for awhile. But if most of your money is in cash in a well hidden area, you still have access to it, no matter what happens to your card.

[DYLAN150]

Wrote an email to comerica bank which handles the social security direct express card. Here is what they wrote back:
Thank you for contacting Comerica Bank. We appreciate the time you have
taken to send us a message.

Comerica Bank does not have access to your Direct Express Card information.
If you have any questions regarding the card or the program, Direct Express
contact customer service:

[DYLAN150]

WhatMoney: No judgements yet but my checks go to Bank of America and I owe them for two credit cards. I don't know how long I can owe them before they take the money out of my accounts. Better be safe than sorry.......

[WhatMoney]

Yea, I sent my Credit Union and Bank an e-mail asking them about protected funds. This was a week ago, no reply so far. I don't expect to receive one either. Going to all paper checks to be safe.

E-mail will never work. Banks ignore e-mail for legal questions.

If you want to get an answer about "protected funds", you need to take a copy of the State statutes that claim you have protection for exempt deposit accounts to your bank or credit union and only speak with the manager. Customer service types are useless for legal questions. The branch manager is also likely useless, as in knowing nothing about the exemption law, but by speaking IN PERSON you get a commitment from him/her to relay your questions to their legal department. Then you must follow up every few days until they decide to answer you. This is standard procedure for getting anything done with a financial institution when you are not one of their high income earning customers. Again e-mail and telephone calls are useless. You must confront them in person to ever get an answer (other than no or f*ck off).

If you are going to all paper Treasury checks for SS you risk lost mail and the inconvenience of having to drive somewhere to cash them. Banks around here will not even cash US Treasury checks unless you deposit them in your account, and then you must wait one day until you can withdraw any money with a money order or cashiers check, for example, which is another trip. I call that inconvenient and a waste of my time. With direct deposit the funds are available the same day and you don't have to drive anywhere. If you live close to a WalMart then life is easier. The closest WalMart here is an hour drive through traffic, one-way - I've never been there in my life.

BTW, I don't recall, but do you already have a judgment against you? It really makes no sense to inconvenience yourself by going all cash unless you have a judgment or expect to get one soon, meaning you have already been served.

And if your income is exempt there are many ways to maintain direct deposit and stay protected, using cash loaded debit cards that also accept direct deposit, if you can't get your bank to agree to protect you.

[DYLAN150]

Yea, I sent my Credit Union and Bank an e-mail asking them about protected funds. This was a week ago, no reply so far. I don't expect to receive one either. Going to all paper checks to be safe.

[GoingDown]

In my opinion-- paranoid as some might say-- it is better to be safe than sorry with your money. As a rule of thumb, once someone has a judgment against you, never leave more money in a checking account than you can afford to lose.

It may be a pain in the neck to live the "judgment proof" lifestyle, but it does make it very difficult for judgment creditors and their attorneys to get at your money.

There were some older posters on here a few years ago who could tell you horror stories of having the funds they thought were exempt seized in their checking accounts. It does happen.

The last checking account I had before I closed it sent me a list of the fees they could charge account holders, and one of them was a $75 fee for just responding to a garnishment order. $75. Poof! Gone! That's for responding. Even if they said no to the judgment creditor. And from my relatives' experiences and personal friends' experiences, at the very least, the bank is going to tie up those funds for a few days while they have their attorney look over the garnishment documents that were served upon them, and in most cases, they are going to wait until you go to court, win, and then serve them with more documents from the court saying it is okay for them to release the funds back to you. In the meantime, checks are bouncing. Preauthorized payments are bouncing. Your debit card is being declined for purchases. And guess who gets to pay all the fees associated with this? That's right. You do. By the time your checking account gets unfrozen by the court, you may not have much left.

Having a checking account may be convenient, but it can be very costly as well once someone gets a judgment against you.

I have yet to hear of a pre-paid debit card balance being seized by a judgment creditor. I think about the only way that could happen is if you told them about it and they convinced a judge to order you to turn it over to the judgment creditor.

But, to be on the safe side, I only keep enough money in mine to pay the bills and buy stuff from Amazon.com as needed. However, it should be noted that I don't get Social Security nor any direct deposits at all. I get paid in cash or by a check which I stand in line to cash at the local bank branch. So, to get money on my pre-paid debit card, I have to go to Wal-Mart and load it with cash. So it is a little bit of a different situation.

[ValleYum]

We used out of state checks all the time from USAA and Navy Federal here in Washington state, DYLAN.

Here is an application for a Delaware bank:

http://www.fbdel.com/assets/files/AccountApplication.pdf

And a phone number to contact them - nothing like going straight to the source to ask: 888-FBD-3511

[WhatMoney]

Valle: I live in Washington State, how do I get an account in Delaware? Some places here won't take an out of state check!

You apply online like any other out-of-state bank. They send you checks and a debit/VISA/MC. I have never heard of anyone refusing an out-of-state check to pay a bill. Why do you even use or need checks? An online account provides free Bill Pay, or you can use ACH transfers. And other purchases can be done with the debit/VISA card. If you want pocket cash, get it from a grocery store when you make a purchase. Most stores allow $40 to $80 cash back every purchase. Otherwise you would need to pay an ATM fee for a cash withdrawal. Some online banks will refund you the local bank ATM fee.

As far as Delaware bank not honoring checking account levies, that is what their state statutes say, but I've yet to have this confirmed by anyone in actual practice. You would think some debtor with a credit card judgment who lives and banks in Delaware would show up here someday if their account was frozen by a Delaware bank. So far it has not happened. Do we have any BKforum members that live in Delaware?

[WhatMoney]

GoingDown: I put in for the social security express card but thats from a bank in Texas. I am now requesting other checks to come to my house. Might be a hassle but at lease I will have the $. Here is what I wondering about social security express card, couldn't this be garnished as its from a bank in Texas?

Your social security funds are exempt by Federal and State law. The Texas bank that is contracted by the social security administration to handle social security deposit debit cards OBVIOUSLY know their Billion dollar contract is from Social Security. Therefore there is simply no way in hell the bank would illegally freeze social security funds on a debit card. The only debtors that can seize social security funds are other government agencies. A credit card debt is exempt and by definition the Texas bank knows this in advance, since they have issued you a debit card that has direct deposit of social security as the only source of funds.

You have nothing to worry about using the social security debit card, or leaving a balance on the card. Do not become unreasonably paranoid about something that cannot happen, as some on this board seem to be.

[GoingDown]

Valle: I live in Washington State, how do I get an account in Delaware? Some places here won't take an out of state check!

It wouldn't be safe from creditors anyways because of ChexSystem and it will also appear on your credit report as an inquiry. Might as well ring the dinner bell for creditors.

[GoingDown]

GoingDown: I put in for the social security express card but thats from a bank in Texas. I am now requesting other checks to come to my house. Might be a hassle but at lease I will have the $. Here is what I wondering about social security express card, couldn't this be garnished as its from a bank in Texas?

The difference is that a pre-paid debit card is not the same thing as a checking account and it is not treated the same by the financial institutions issuing it. It will never appear on your credit report or on ChexSystems. The judgment creditor would only know about it if you told them about it. If they don't know about it, they can't find it, so how could they ever try to garnish it? I would never tell them about it.

And to be on the safe side, the day your Social Security funds become available on your card, I would make any necessary utility payments with it, online purchases such as Amazon.com, and then withdraw most of the remaining money and keep it in the form of cash. You'll be surprised how much money you save just using cash. For one thing you can budget everything you buy-- only bring a set amount of cash to spend that fits your budget and when it's gone, you're done spending for that day. It has literally saved me a fortune by using cash only.