Can creditor garnish bank account?

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Dear Bankruptcy Adviser,
I receive Social Security disability as my only income and I have creditors who keep garnishing my bank account, even though they cannot garnish Social Security. I have informed them several times, even before the first time, and I have notified my bank that complying with garnishments is illegal due to the type of money involved.

My bank just blindly complies. I have found out that I need to hire a lawyer to get this money back, as I have even filed a complaint with the Attorney General, but I cannot afford one on $600 per month income. How do I stop a collector from illegally taking my Social Security money? They certainly don’t tell the judge, and I am never notified of proceedings so I can tell the judge. All they ever report is that I “have income.”
— Jamie

Dear Jamie,
While this response will not get to you in time to save your money, hopefully, others can avoid your fate. Typically, once funds are levied and sent to the sheriff’s department, the sheriff will hold the funds for about one to four weeks only.

You are correct when you state that your Social Security income is protected from creditor claims. I could not find one state that did not exempt Social Security income. Meaning, state legislators have deemed these funds protected from creditor claims.

However, you are responsible to properly notify the court and sheriff that the levied funds in your checking account are Social Security funds and thus exempt. The judge, clerk or creditor is not responsible to determine whether you have exempt or nonexempt funds in your checking account. You are required to complete the appropriate paperwork to protect these funds.

I understand that you might not be comfortable completing the necessary documents, but maybe you know someone who can help you navigate through the process. In California, you have to complete a one-page document and file that document with the court. So long as this document is filed before the sheriff sends the funds to the creditor, you will be able to recoup your money.

I contacted Bank of America, Washington Mutual and Wells Fargo to understand bank policy regarding sheriff levies of exempt funds. While I believe that banks could institute internal policies that comply with local law, I’ve compiled a composite answer from the three banks:

The bank must comply with legal process and court orders served on us. Failure to comply with court orders could render the bank responsible for the underlying debt. Additionally, we are not legally obligated to determine the status of funds held in one of our bank accounts. Since we handle thousands of bank levies per year, it would be too expensive or difficult to protect our customers’ funds while minimizing our legal exposure.

Options to protect your Social Security income

Contact the Social Security Administration to have your check mailed directly to you and not automatically deposited into your bank account. While I understand this will result in more work for you, it is a better alternative than never-ending bank levies.

For $50 per month, you might be able to hire a law firm to protect your money. Some firms have addressed this issue by having their clients deposit funds into a local, small bank affiliated with the law firm. All funds deposited into this bank are exempt from creditor claims. The law firm protects the bank from potential liability by certifying that all funds are exempt. While $50 might be too expensive for you, this is the only alternative other than cashing the check each month yourself.

Justin Harelik is a practicing attorney in Los Angeles. To ask a question of the Bankruptcy Adviser go to the “Ask the Experts” page, and select “bankruptcy” as the topic.