Automatic exemption for Social Securiy deposited in checking.

[GoingDown]

You might find the information in this thread to be helpful:

http://www.bkforum.com/showthread.php?67251-Exempt-funds/page2

GD, all of your questions/concerns were answered in detail in the references I provided. But I'll try to answer your questions anyway.

What if the checking account has 61 days of exempt direct deposit funds?

The purpose of these rules is protect two months of exempt income. Most government programs direct deposit on the same day of the month every month. The actual rule looks back two months based on the day preceding the day of review by the bank. So for two 31 day months, the lookback period would be 62 days.

For example, the bank receives a garnishment order on Sept. 1. They process the order on Sept. 2, they are allowed 2 days to process. They look at all exempt deposits from midnight on July 1 to midnight on Sept 1 (62 days) to determine the protected amount. Any deposit on Sept. 2 is not part of the levy, since the levy is only good for the day it was received by the bank. The protected amount is whatever money is on deposit on Sept. 1, up to the two month limit.



Wouldn't you have to withdraw any money deposited before the last 60 days?

Any amount of money that exceeds the two month lookback is not protected. So yes, if you wanted to avoid the usual court exemption process for removing a banking freeze and garnishment of your exempt funds, you would not leave more than two months income in your account.

And who determines this? Someone at your bank? The court?

The bank determines the amount of protected funds, based on these very specific rules. Each ACH exempt transfer will be encoded with an "XX" in the header name, so anyone that can recognize XX can easily determine the protected amount. In reality the banks are already modifying their programming to make this process automatic. It's estimated that 95% of all banks will have this process automated by the time the rules go into effect in May.

The courts have nothing to do with this - that is the whole idea of the new regulations - to keep the court exemption process out of the picture. The banks also have a safe harbor protection against any court action. The bank only needs to notify the depositor and the court that the funds were exempt, and hence the garnishment was rejected. The judgment creditor does not need to be notified by the banks why he didn't get his money. I like that part.

Does it say anything about what fees the bank is allowed to charge you for responding to a court order (garnishment)?

Yes, the banks will not be allowed to charge any fees to the account holder for responding to the court order, unless there is unprotected money in the account. If a couple receives $4000 in social security over a two month period, then only funds over the $4000 will be subject to any bank fees.

I know my last checking account was at a bank which explicitly stated in writing that they would charge a fee of $75 just for responding to a court order such as a garnishment. I have heard of some of them even charging their attorney's hourly rate for responding to the court order, which can easily wipe out a small checking account balance.

Times are changing GD. There will be no bank fees or attorney fees that can be taken from the protected amount of funds in the account.

Your bank still has to fill out paperwork and respond to the court. They often have their lawyer look at it and respond to it, and well, they have to pay someone to do these things.

So what? First the process will be automated so the janitor could handle the paperwork. The account holder is the victim here, and should not be charged for someone else attempting to break the law. These new regulations are clear and fair. A bank can always close your account after you receive a garnishment, claiming you are not a profitable customer. There will always be another bank around the corner willing to take your US Treasury direct deposits. An impact analysis was done on how these rules would affect smaller banks and credit unions, for example. And it was determined that there would be no measurable effect on their profits. You can read all about all the 500+ questions these Agencies considered before this final rule making. These regulations were carefully researched after banking industry feedback, and the banks generally agree that this kind of system to prevent abuse of the disabled, the elderly, and veterans, was needed.

While it is a step in the right direction, I would still be wary of ever leaving more money in a checking account than you can afford to lose, once you have a judgment against you.

That's up to you. You won't lose two months of exempt direct deposit funds no matter how wary you are. You don't have any exempt funds, and being younger you don't mind the inconvenience of an all cash underground lifestyle. Seniors in their 70's and 80's and 90's should not have to put up with that kind of crap. This law gives some peace of mind to retirees, the disabled, and veterans who depend on their exempt monthly government benefits to survive.

These new regulations also do not require a depositor to notify a bank in advance that their deposits are exempt. The exempt status is clear from the ACH coding, and the banks only have to follow the regulations from the regulatory agencies that determine the banks existence.

Also, these rules will trump any state laws about multiple day garnishments. The garnishment can only be effective on the day the bank receives the court order. No further days of levies will be honored if the account has exempt deposits. This is already the case in Oregon, but in some states the creditor can keep stealing exempt funds after the first day using the original garnishment. The states will need to change their statutes now to make this multiple day levy of exempt funds illegal.

These federal regulations are the minimum requirement to protect exempt funds. If a state has further rules that provide more protection, then the state rules still apply. In my state the protection goes up to $7,500 per account holder, for example.

[tobee43]

You are correct that it is not the bank's job to determine whether a trust is irrevocable. The bank can't make the trust irrevocable, but their records may show that it is. They should get that kind of info from the trustee. When the account was opened, the trustee probably signed a trustee's certificate of trust on the bank's form instead of supplying his own certificate. Either the trustee checked a box saying the trust is irrevocable or the bank officer filled the form out for the trustee and the trustee did not correct it before signing. Just like debtors should read their BK petitions before signing them, a trustee should look at all forms that they sign and make sure the info is correct.

It makes sense that SS deposits would not be made to an irrevocable trust. But, as you have experienced, they are deposited to revocable trust accounts all of the time.

This is way off topic, so let's not discuss it further here. Tobee, it sounds like you probably have the whole situation under control. But, if you have any questions about dealing with California trusts and banks, now or in the future, post them here: http://www.bkforum.com/forumdisplay....s-Wills-Trusts. I will try to help (If I don't respond, send me a PM to let me know you posted a trust question in case I miss it).

yes WAY off!! LOL!! sure i do way under control! one would hope i would know they can't do that!

my point is many bank employees do not know what the heck they are doing, and many times give information or do things that are completely incorrect and actually in some cases unlawful. maybe not their intent, however, it many times certainly makes a mess for people to have clean up themselves. it's just important in many situations to be careful about how one's ss payments are handled.

[rta]

If you are responsible to pay, you have already incurred the debt. You can list it as a contingent debt on your petition and notice the hospital (or doctor, or whoever sent the bill). It will be discharged even if at the time of filing you don't know for sure whether you will be responsible to pay the debt. If, however, you think you will be incurring additional medical expenses, you should wait to file until your care is complete.

There isn't supposed to be a payment obligation on my part. I'm not sure why they sent me that bill more than a year ago. However, they might follow up on it someday, who knows? If I do file for BK anytime soon, I would include that bill.



I suggest you either go to a branch and talk to somebody or call and ask to speak to a branch manager. The people who answer the phone are probably the least knowledgable about this kind of issue.

I've talked to a live person at one credit union, and to supposedly knowledgeable people over the phone. The next step would be to look for a branch manager. Of course, the branch manager may not know much, either, but it's worth a try.

[LadyInTheRed]

Wow, the system is more complicated than we imagined. Even filing BK is not that simple. For instance, my medical bills are supposedly being handled by my county public health plan. However, when I had big surgery last year, they did send me a bill for over $67K, stating that if nobody springs for it then I'm ultimately responsible. It's better for me to wait out these medical bills, rather than file now and then not be able to use BK later.

If you are responsible to pay, you have already incurred the debt. You can list it as a contingent debt on your petition and notice the hospital (or doctor, or whoever sent the bill). It will be discharged even if at the time of filing you don't know for sure whether you will be responsible to pay the debt. If, however, you think you will be incurring additional medical expenses, you should wait to file until your care is complete.

In the meantime, it's better to know that SS benefits are really going to be protected. And yet the banks don't seem to be aware of this, or at least their intake people are not aware.

I suggest you either go to a branch and talk to somebody or call and ask to speak to a branch manager. The people who answer the phone are probably the least knowledgable about this kind of issue.

[LadyInTheRed]

no, this is not my account, (without making any direct disclosures), let's just say it is a clients account from a trust and it's just amazing to me that; and this is just an example of what they did; they forwarded documents marking the trust as irrevocable while in fact this is a revocable trust. representing the trust, comerica MADE me open this account specifically and insisting their policy is that ss funds cannot be deposited into the actual "trust" bank accounts. i have worked with major banks that allow ss funds to be deposited directly into a trust checking and or saving account. my point is, it is not their place to decide or determine which part of a trust, if any, or if a trust, is irrevocable and this in this case could cause problems for the clients beneficiaries, if this estate were to go into probate. they have a copy of all pertinent documents how about looking at them? while i just said a mouthful that most likely doesn't make much sense to many, all i can say simply is this.

they made a BIG boo boo! LOL!

You are correct that it is not the bank's job to determine whether a trust is irrevocable. The bank can't make the trust irrevocable, but their records may show that it is. They should get that kind of info from the trustee. When the account was opened, the trustee probably signed a trustee's certificate of trust on the bank's form instead of supplying his own certificate. Either the trustee checked a box saying the trust is irrevocable or the bank officer filled the form out for the trustee and the trustee did not correct it before signing. Just like debtors should read their BK petitions before signing them, a trustee should look at all forms that they sign and make sure the info is correct.

It makes sense that SS deposits would not be made to an irrevocable trust. But, as you have experienced, they are deposited to revocable trust accounts all of the time.

This is way off topic, so let's not discuss it further here. Tobee, it sounds like you probably have the whole situation under control. But, if you have any questions about dealing with California trusts and banks, now or in the future, post them here: http://www.bkforum.com/forumdisplay....s-Wills-Trusts. I will try to help (If I don't respond, send me a PM to let me know you posted a trust question in case I miss it).

[rta]

Wow, the system is more complicated than we imagined. Even filing BK is not that simple. For instance, my medical bills are supposedly being handled by my county public health plan. However, when I had big surgery last year, they did send me a bill for over $67K, stating that if nobody springs for it then I'm ultimately responsible. It's better for me to wait out these medical bills, rather than file now and then not be able to use BK later.

In the meantime, it's better to know that SS benefits are really going to be protected. And yet the banks don't seem to be aware of this, or at least their intake people are not aware.

[HHM]

Here is a link to what I am referring to. http://www.google.com/url?sa=t&rct=j...ulB2Yw&cad=rja

This is just one example of the New Rules regarding Social Security and other exempt funds. It is an old article and I will search for more recent ones. I have asked my bank about it and they did confirm it is true and even showed me the xx flags on the transaction numbers on our online statements. This account only gets 3 deposits per month. One for Social Security, One for my wife's pension both which are automatically deposited and one manual deposit from a disability insurance payment. The total is less then $2000.00 per month. We pay only regular household and personal bills out of this account. From my reading it appears that according to the new Law the way it works is that there is an automatic exemption of first $2875.00 on any account the has Social security payments auto deposited and the bank has the responsibility to flag the account as such with no intervention by the depositor. At least this is how I have read and understand it.
As per my original post I am hoping to get some confirmation from some one who has personal knowledge or experience with this in the past year since it is a new law.
We intend to not take anything for granted and are prepared to make sure that we do not put any unprotected funds in this account. Where I am most concerned is in the way exempted funds are determined and the total or maximum amount that we can have on deposit at anytime. Worst case as I understand things is that even if a levy was attempted we would be able to get them back since I am 90% sure all of the deposited funds are exempt by law.

That is what I thought you were referring too...that regulation is nationwide, not just CA. So, when you said it was a CA law, that through me a bit on trying to explain. So, what I said is basically how it works in practice.

The bigger picture is, instead of worrying about how to avoid a garnishment, how about dealing with the problem and eliminate the risk, get rid of the debt with BK.

[tobee43]

So this is a Comerica bank account in California and this bank might not be handling your SS deposits correctly? That's frightening! They're the ones issuing the Direct Express card for social security benefits.

At any rate, the people I've called do know the situation and have stated that they would not allow a bank levy on social security direct deposits. Is this bank you're dealing with unaware of these issues?

no, this is not my account, (without making any direct disclosures), let's just say it is a clients account from a trust and it's just amazing to me that; and this is just an example of what they did; they forwarded documents marking the trust as irrevocable while in fact this is a revocable trust. representing the trust, comerica MADE me open this account specifically and insisting their policy is that ss funds cannot be deposited into the actual "trust" bank accounts. i have worked with major banks that allow ss funds to be deposited directly into a trust checking and or saving account. my point is, it is not their place to decide or determine which part of a trust, if any, or if a trust, is irrevocable and this in this case could cause problems for the clients beneficiaries, if this estate were to go into probate. they have a copy of all pertinent documents how about looking at them? while i just said a mouthful that most likely doesn't make much sense to many, all i can say simply is this.

they made a BIG boo boo! LOL!

[rta]

So this is a Comerica bank account in California and this bank might not be handling your SS deposits correctly? That's frightening! They're the ones issuing the Direct Express card for social security benefits.

At any rate, the people I've called do know the situation and have stated that they would not allow a bank levy on social security direct deposits. Is this bank you're dealing with unaware of these issues?

[tobee43]

I'm concerned about these issues, too. My phone calls to nearby banks (I'm in California) has convinced me that they know nothing about these procedures. Or maybe their phone reps are totally uninformed. One told me that their finance person said the levied funds will get frozen and the depositor has to get it unfrozen, however, it goes faster if the deposits are from Social Security. Another said she was sure their legal department would follow whatever rules exist.

The only bank familiar with the procedure was Comerica Bank, which is the bank that issues my Direct Express card that gets my SS deposits. So I could open a checking account with them and get my benefits directly deposited, and they would know not to freeze the funds for some creditor. Then I could also write checks based on the account. HOWEVER, their nearest branch is downtown, and I'd prefer to have a neighborhood bank. There are so many neighborhood banks within walking distance, that it's a shame none of them know what I'm talking about.

Maybe I need to call more banks. So far, the banks and credit unions I've called are in the dark about protecting SS funds.

i deal with comerica in calif., and their rules are completely different and vary from those of boa and wells fargo, that's all i can tell you. none of them follow one policy it appears. i just had to call them today as a matter of fact and what a mess. i can tell you this, they do NOT know what they are doing. this matter was with respect to an account that solely has ss deposits going into it and i can say, they even filled out their own forms incorrectly. scary.

[rta]

I'm concerned about these issues, too. My phone calls to nearby banks (I'm in California) has convinced me that they know nothing about these procedures. Or maybe their phone reps are totally uninformed. One told me that their finance person said the levied funds will get frozen and the depositor has to get it unfrozen, however, it goes faster if the deposits are from Social Security. Another said she was sure their legal department would follow whatever rules exist.

The only bank familiar with the procedure was Comerica Bank, which is the bank that issues my Direct Express card that gets my SS deposits. So I could open a checking account with them and get my benefits directly deposited, and they would know not to freeze the funds for some creditor. Then I could also write checks based on the account. HOWEVER, their nearest branch is downtown, and I'd prefer to have a neighborhood bank. There are so many neighborhood banks within walking distance, that it's a shame none of them know what I'm talking about.

Maybe I need to call more banks. So far, the banks and credit unions I've called are in the dark about protecting SS funds.

[WanabeFree]

Here is a link to what I am referring to. http://www.google.com/url?sa=t&rct=j...ulB2Yw&cad=rja

This is just one example of the New Rules regarding Social Security and other exempt funds. It is an old article and I will search for more recent ones. I have asked my bank about it and they did confirm it is true and even showed me the xx flags on the transaction numbers on our online statements. This account only gets 3 deposits per month. One for Social Security, One for my wife's pension both which are automatically deposited and one manual deposit from a disability insurance payment. The total is less then $2000.00 per month. We pay only regular household and personal bills out of this account. From my reading it appears that according to the new Law the way it works is that there is an automatic exemption of first $2875.00 on any account the has Social security payments auto deposited and the bank has the responsibility to flag the account as such with no intervention by the depositor. At least this is how I have read and understand it.
As per my original post I am hoping to get some confirmation from some one who has personal knowledge or experience with this in the past year since it is a new law.
We intend to not take anything for granted and are prepared to make sure that we do not put any unprotected funds in this account. Where I am most concerned is in the way exempted funds are determined and the total or maximum amount that we can have on deposit at anytime. Worst case as I understand things is that even if a levy was attempted we would be able to get them back since I am 90% sure all of the deposited funds are exempt by law.

[tobee43]

i do believe the banks, as confusing as this all is that it does vary to their general policies in ca. i have one trust from calif which i had to set up a separate account for the depositing of the settlors ss check while i had, or when using a different major bank in calif, i was able to have it directed solely to the trust account. i was a bit confused as to why one bank did it one way and why another bank in the same state handled the funds differently. being in no position to argue with whatever policy that want to use, i just comply.

one would like it rather difficult even with the legal sources that most of the creditors have at their fingertips, trying to garnish a debit card issued from the Federal Government would be a taunting task.

[HHM]

Generally, exemptions are up to the debtor to enforce. You are correct, the garnishing creditor has no idea and the law doesn't place a burden on them to figure it out. However, the law varies as it relates to the bank. Some states, like CA, require banks, if the customer requests, to set up specially designated accounts that would be protected against garnishment. In that sort of situation, the bank has some responsibility. However, I have never heard of these laws extending all the way to any ol'e account.

So, for example, if the debtor sets up a specially designated account that contains only SSI, then if the bank receives a garnishment, the bank will not freeze that account.

As for the debit card, the SSI card cannot be garnished, but in general any pre-paid debit card "can" be garnished, it is just impractical and very difficult to do.

[tobee43]

HHM, the only question i would ask, is how the creditor distinguishes or identifies these FIFO deposits are protected under an exemption statue? i mean, when these creditors grab, they grab with pointed sharp claws and blindfolds on.

also, for us it wasn't really an "extreme" measure and done only for the protection of the funds, it was set up like that because we knew we were leaving the state. you know i like to be extreme anyway, but in this case, it was just for what i was hoping to be a way to divert some attention away from us, while also setting up new accounts in our new home state. i wasn't suggesting OP follow what we did, i was just exchanging our experience with these types of funds and how and what we did to attempt to protect them from creditors. we still have those bank accounts today.

that being said, your suggestion is sound if there is actually a way to set up this account to be identified as being protected under a exempted statue. i rather prefer your suggestion with respect to the debit card. as you have pointed out, a debit card cannot be garnished.


"If a creditor other than the federal government tries to garnish your Social Security benefits, inform them that such an action violates Section 207 of the Social Security Act (42 U.S.C. 407).

Section 207 bars garnishment of your benefits. It can also be used as a defense if your benefits are incorrectly garnished. Our responsibility for protecting benefits against garnishment, assignments and other legal processes usually ends when the beneficiary is paid. However, once paid, benefits continue to be protected under section 207 of Act as long as they are identifiable as Social Security benefits."