Automatic exemption for Social Securiy deposited in checking.

[HHM]

I can't confirm anything about the California law specifically. I wonder how new this law is and if it has been tested, especially on the commingling aspect. Bankruptcy courts generally use a FIFO (First in, First Out) rule when it comes to commingled funds and from a practical matter (not even considering the CA law) it is virtually impossible to say which funds were used when. FIFO works this way...

SSI deposit. Jan 1, $700
Pay check deposit, Jan 10, $1,000
As of Jan 11, there is $1700 in the account, and for the sake of illustration, we will say there have been no outgoing transactions between Jan 1 and Jan 10.
At least what happens in most states and what bankruptcy courts do will be to have the first $700 of withdrawals be attributed to the first deposit, the SSI.

Withdrawals:
Jan 15, $400 car payment
Jan 16, $145 Groceries.
Jan 17, $200 utilitiy bill.
Jan 18, file bankruptcy, or receive garnishment.
Balance on Jan 18 $955. The bankruptcy courts at least (and most state courts) will say that the $955 in the account is NOT SSI and therefore not subject to the SSI exemption.

So, best practice, not withstanding the CA law on commingling, is to NOT commingle and set up a specially designated account that ONLY contains SSI. I wouldn't go to the extreme that Tobee did and go to another states (which is a pain in CA). You can get your SSI put on a Debit card and that Debit card is not subject to garnishment.

[tobee43]

the most common problem with these types of situations are: the creditor usually grabs the money first and then you are at the mercy of trying to get the funds back. we were also concerned about this situation prior to the completion of our bk. concerning our bank accounts since they only consisted of "exempted" income. however, a creditor does not, and usually cannot distinguish those funds are protected under any exemption statue, at the time of the pull. we filed bk and then this issue was no longer a threat. however, what we did is, went to another state and had the ss and pensions deposited in that bank account. we used small local banks. i can't swear to this, but it may have helped stall the situation enough to reach our discharge and bk close. although any creditor can track one with your ss number.

my best advise to you is to think about this. if it's your wife's account, and not yours, providing it's "safe", and i'm not quite certain about that under calif community property laws of calif. although many prenups have provisions about such matters, although i'm thinking this not be your case. why can't you just deposit them into your personal account for the time being, if and only IF that is allowable. if she must keep this account open, can't it be with just a small amount that would not be worth the while of the creditor. and, remember they can grab that account over and over again, once they start. i would also ask the bank, is there something that can be done to safe guard the exempted funds.

[WanabeFree]

I have searched the automatic exemption from seizure of social security deposits to personal checking accounts but its still not clear to me how this works. My understanding is that at least in California , Social Security has an automatic exemption and within limits can no be seized by creditors if it was auto deposited. All funds are flagged with and XX appended to the transaction number and as I read it the bank is required to disallow any seizures of said funds. Where it gets muddy to me is that if I read the law correctly the exemption is for $2875.00 and it does not matter if you have other co mingled funds as long as you have your Social security automatically deposited.

Can anyone confirm or tell me if this is correct or have I missed something. I want to know because my wife is being sued for an old credit card debt but needs to keep her checking account if at all possible but does not want to put more money in the account than is 100% safe from seizure or garnishment. She has not other income other than a small pension and disability benefit that are also as I understand it safe from seizure in California but not necessarily in the same way Social Security is. The suite is in her name only and for now I believe that I am safe but could eventually be as California is a community law state. For now we have separate checking accounts and until or if they do a court ordered asset search they have no way of getting to my accounts because her name or social security number are not on them.

Any first hand knowledge or experience would be helpful.