If a judgment has been entered against you the next thing to expect is a garnishment of your bank account.  You will get no notice or advance warning of the garnishment.  The judgment creditor simply fills out paperwork and serves it on you bank.

Just like magic your money disappears!  Not a happy day!

Social Security and other benefits, for example SSI and VA benefits) have long been exempt from the claims of creditors.  HOWEVER, here’s the problem.  If a judgment creditor serves a garnishment, then the bank must freeze the money and then pay it into court.  Then it’s up to YOU to fight to get the money back.  Meanwhile your electric and cable bill is going unpaid.  Perhaps you may not even have money for groceries.

However a new rule passed by the U.S. Treasury Department (effective May 1, 2011) gives new protections for monies in your account if they are the proceeds of protected payments mentioned above.  Banks can no longer simply pay over the federal benefits just because the garnishment or levy was served.

The new rule requires the bank (not you, the bank) to check to determine if federal benefits such as Social Security, SSI, VA Benefits (and others) were deposited into the account during the last two months.

As you would expect the new rule does not apply to a garnishment to collect child support.

You will also need to fill out an exemption notice if there is money in the account that should be otherwise exempt.

One other important exception is that the rule doesn’t apply unless it was made by direct deposit or Direct Express card.  If you get the direct deposit, then transfer the money to another account, the protection of this rule will not apply.

So what should you do?

First, if there is a judgment against you be aware of this new rule.

Second, if you have a judgment against you, then you are at risk of a bank or wage garnishment.  You should contact an experienced Chapter 7 and Chapter 13 bankruptcy attorney to better understand your options.

We offer a free consultation so that you will be armed with the right information.

Contact the Knoxville – Sevierville Bankruptcy Attorneys at Scott Law Group, PC by calling 865-246-1050 to schedule an appointment today.

Other Articles You May Find of Interest:

Rebuilding Credit After Bankruptcy

How to Stop Collection Calls (video)

Photo Credit:  Flickr: i5design