New Rule Protects Benefits From Creditors

Too many people dismiss the idea of filing bankruptcy out of fear that losing Social Security, Supplemental Security Income or veterans’ benefits. While these funds may be included in the budget of a bankruptcy means test, they are not included as income. These forms of payments cannot be used to pay off debts in a bankruptcy proceeding and the Social Security Act prohibits any form of debt collection, such as a levy or garnishment.

Unfortunately, many people who are struggling to get by are not aware of these rights and unscrupulous creditors froze bank accounts that should have been legally protected. A new rule from the U.S. Department of the Treasury went into effect this May with the intention of better protecting senior citizens, veterans and the disabled who have turned to a Chapter 13 or Chapter 7 bankruptcy process as a form of foreclosure help.

The biggest change because of this new rule is that the burden will now be on the banks to determine if they can put a freeze on the account rather than consumers having to go to court to unfreeze those accounts. My colleagues at the Northwest Chicago bankruptcy firm of U.S. Law Attorneys, Ltd. made an excellent suggestion in a recent blog post about garnishing exempt funds by recommending that recipients of such exempt income “switch to electronic deposits to ensure your bank will watch out for you if a judgment creditor attempts to unlawfully garnish your account.”

Has a creditor ever frozen you or a loved one’s bank account? How did you resolve the situation?

Law Firm of Kevin D. Judd – Washington DC bankruptcy attorney

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