For eight decades, the Social Security Administration (SSA) has provided necessary services to the nation's most vulnerable populations. Presently, 10 million people receive Social Security or welfare benefit checks. Unacceptably, the National Consumer Law Center reports that more than 100,000 recipients of these necessary benefits have their accounts improperly frozen each month due to garnishments and other seizures. However, on May 1, 2011, the federal government initiated a strategy to protect the deposits of elderly and disabled Americans.
By law, Social Security benefits cannot be garnished. Commonly referred to as Section 207, federal law specifically states that payments shall not be subject to "execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law." Once benefits are paid, they are continually protected under this code section. Narrow exceptions include federal levies, such as IRS payments and child support and alimony obligations.
Despite the law, general creditor garnishments, levies and other actions routinely occur. Banks receiving SSA benefit payments as deposits have regularly allowed a customer's monies to be seized when courts order such action and benefits have comingled with other monies. This occurs because banks previously did not distinguish legally-protected funds from others in their customers' accounts. When illegal garnishments occur, affected benefits recipients are often unable to access needed funds for weeks, and sometimes months.
The new rule will add electronic tags to protected deposits in beneficiary's accounts. With the aid of these markers, banks will be required to exempt these protected funds from attachment and recipients will have access to their money in lieu of court-ordered collections. While the rule does not change the law, it obligates banks to determine which funds must be protected prior to allowing accounts to be garnished.
A number of consumer and disability advocacy groups and organizations, including the National Consumer Law Center, support the governmental move. The new rule also protects VA and other similar benefits and will ultimately protect military benefits.
For nearly eight decades, the SSA has aided the elderly, veterans, and disabled citizens. Through this new rule, the agency will better ensure that needed benefits are received and remain immune from creditor collections.
