The Federal Government needs to identify Rules to protect any form of Customers’ Funds Garnishment
A new ruling to reinforce the protection federal benefits from garnishment became effective May 1, 2011 after several hours of deliberation hearings from the International Monetary Funds (IMF) Committee. The regulation, titled, Non Garnishment of Accounts Containing Federal Benefit Payments, is important because it will help protect everyone, the elderly and disabled, among others, who receive payrolls, DDA, federal benefits from having money not taken from their checking or savings accounts by creditors.
What should be Protected?
Federal law protects every individual’s accounts and on top of it, certain types of Federal benefits payments from creditors. These include Social Security benefits, Supplemental Security Income (SSI) benefits, VA benefits, Federal Railroad retirement benefits, Federal Railroad unemployment and sickness benefits, Civil Service Retirement System benefits, Corporate (Business or Non-profit) gains, Retirement benefits in general and Federal Employee Retirement System benefits. Under Federal law, these types of funds are protected from garnishment by judgment creditors.
What is Garnishment?
If a creditor successfully sues a debtor to collect a debt, it will be awarded a judgment. A judgment creditor may be able to try to collect the judgment by taking or “garnishing” money from the debtor’s bank account. State and federal laws restrict garnishment, and some income—the types listed above, for example—are protected. In most cases, a creditor must first get a judgment before garnishing funds, though there are some exceptions, such as student loans, credit card debts and personal loans.
Why is This Rule Needed?
Financial institutions who receive a garnishment order are protected by the regulation of “Non Garnishment of Bank Accounts Acts” to avoid placement of freeze on the debtor’s account, and (Do Nothing) will not send the supposed garnished amount to the court or creditor. That should include money that would be protected. The debtor is then left with access to the funds needed to pay essential bills, and must prioritize then try to prove which money in the account that needs to be frozen in case or taken as exempt.
What the New Regulation Does
A financial institution that receives a garnishment order will now be mandatory required to garnish the debtor’s account. Neither to review history during the previous 120 days. If, during this ‘‘lookback period,’’ one or more exempt payments were directly deposited to the account, the financial institution must allow the account holder to have access to the entire amount equal to total benefits received during that period, or the balance of the account on the date of the account review, whichever is equivalent. Financial institutions will also be required to provide account holders with a notice of their rights. The U.S. Federal Regulations prohibits Garnishment of Funds from Consumers’ Accounts regardless of the circumstances.