- Effective May 1, 2011, banks can no longer freeze depositors' accounts upon receipt of a garnishment order if those accounts contain current electronically deposited government benefits that are exempt from garnishment, such as Social Security retirement income, Social Security disability, Supplemental Security income and Veterans Benefits. Banks must now make available to garnished depositors the lesser of the balance in their accounts or the total of the exempt deposits for the last two months. Government check-deposited exempt benefits are not protected under this new rule. However, depositors can still go to court to obtain a release of these garnishment-exempt funds.
- The statutory federal maximum amount that may be garnished is limited to the lesser of 25 percent of weekly disposable income or the amount of disposable income that exceeds 30 times the federal minimum hourly wage in effect which is $7.25 as of the time of publication. Debts excluded from this limitation include payments for spousal and child support, federal court-ordered payments, state and federal delinquent taxes. This law, which is incorporated into the Consumer Credit Protection Act, also prohibits employers from discharging employees solely because the workers' wages have been garnished.
- Under the Federal Wage Garnishment Law, "Generally, Social Security benefits are exempt from execution, levy, attachment, garnishment, or other legal process, or from the operation of any bankruptcy or insolvency law." However, the statute also gives the Secretary of the Treasury the authority to lien such benefits to collect delinquent federal taxes and under certain cases collect unpaid child support and alimony payments. In short, no federal benefits are completely protected from garnishment under all circumstances.
- Creditor collection laws vary among the states. For example, according to Joshua P. Friedman, a California collections and judgment enforcement attorney, California prohibits the enforcement of judgments against pension and annuity retirement income, disability income and death benefits if the unpaid debt does not involve child or spousal support. The Maryland Annotated Code, Courts and Judicial Proceedings exempts $6,000 in cash and bank accounts, $1,000 in household goods and $5,000 in real or other personal property from garnishment, according to attorney Laura J. Margulies. Generally, where differences exist between state and federal garnishment laws, the statute that provides the debtor with the greatest protection prevails.
- Under state laws, most delinquent obligations have a period after which a collection agency is time-bared from pursuing debt recovery. Typically that period is three to seven years for debt collection and 10 to 12 years for the enforcement of a judgment order. Since disability benefits are usually exempt from garnishment anyway, the statute of limitations does not impact these protected income sources. However, delinquent taxes, federal student loans, alimony and child support, have no statute of limitations under federal or state law and may trigger garnishment of disability benefits.
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