Answers About Garnishments

If a creditor sues to collect a debt you owe and wins a court judgment against you, the creditor can ask the court for an order to garnish your salary, bank account, or other assets. For example, the creditor can ask the court to order your employer to withhold some of your salary and pay it to the creditor instead of to you. Also, a creditor can ask the court for an order instructing your bank to turn over funds you have in your bank account.

Select from the following questions about garnishments and court judgments.

• May my salary be garnished without a court proceeding?
• May my bank account be garnished without a court proceeding?
• May my Social Security or other federal benefits be garnished?
• How do I find out if money in my bank account is about to be garnished and what should I do next?
• Does my bank have to tell me it has received a garnishment order for my deposit account?
• Does my bank have to tell the court or my creditors if my deposit account contains Social Security, Veteran’s, or other federal benefits that may not be garnished? Is my bank required to freeze my account?
• Due to a garnishment order, my bank froze my bank account and paid money from the account to my creditor, including my Social Security benefit. May the bank do this?
• What can I do if my bank account is frozen and it includes Social Security or other federal benefit payments?
• After my bank froze my account, some of my checks were returned unpaid. May the bank impose an insufficient funds or “NSF” fee for these returned checks? What about a fee to freeze the account?
• A collection agency repeatedly tries to garnish my bank account. Time and again, when this happens, my bank account is frozen. I provided the collection agency appropriate notification that the account contains only Social Security or other federal benefit payments that are exempt from garnishment but they continue to try to garnish my account. May the collection agency continue to do this, even though it knows that the account contains only funds that are exempt from garnishment?

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May my salary be garnished without a court proceeding?

Usually not. In most cases a creditor must win a judgment against you and get a court order before it can garnish your wages. However, some federal government agencies, such as the IRS, may garnish your wages without a court order.

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May mybank account be garnished without a court proceeding?

Usually not. In most cases a creditor must ask a court before it may garnish money in your bank account. This generally is true even if the creditor garnishing money in your bank account is part of the federal government. The IRS, however, may garnish money in your bank account without a court order.

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May my Social Security or other federal benefits be garnished?

Federal law says that many federal benefit payments like Social Security benefits, Supplemental Security Income benefits, Veteran’s benefits, and Railroad Retirement benefits are not subject to garnishment. This means that these funds are exempt and you may be able to stop your creditors from taking these exempt funds from your bank account. However, there are some exceptions. For example, your Veteran’s benefits, Social Security, or other government benefits may be garnished to pay delinquent child support, alimony, federal taxes, or other specific kinds of debt.

The types of state benefits subject to garnishment and those that are exempt vary from state to state. You may want to contact an attorney or the consumer protection bureau in your state for more information.

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How do I find out if money in my bank account is about to be garnished and what should I do next?

Usually, you will get a letter or other notice telling you that a court has issued a garnishment order for money in your bank account. The notice usually will provide information about potential exemptions and tell you what to do if you think money in your bank account is exempt from garnishment. Remember, the court and your creditor may not know if money in your bank account is exempt unless you tell them, because information about your bank account is private. You should follow the instructions in the letter or other notice. There is usually a deadline for telling the court that you think money in your bank account is exempt from garnishment, so make sure you meet the deadline specified in the notice.

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Does my bank have to tell me it has received a garnishment order for my deposit account?

Most banks will do this as a routine business practice or because they are required to by state law.

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Does my bank have to tell the court or my creditors if my deposit account contains Social Security, Veteran’s, or other federal benefits that may not be garnished? Is my bank required to freeze my account?

Currently, banks are not required to look at your deposits and withdrawals to determine whether the money in your account is exempt from garnishment. Also, state law or a court may require the bank to freeze your account even if the account has money from exempt federal benefits. If that happens you may not be able to take money out of the account until the court or your creditor determines that the money is exempt.

However, as a matter of good business practices, some banks will try to find out, if possible, whether your account contains only exempt funds. For example, some banks look at the recent deposits into your account before the garnishment order to see if they are only direct deposits of exempt money like Social Security payments. These banks also will notify the debt collector and the court when they determine that the account contains only exempt money, so that the garnishment can be stopped.

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Due to a garnishment order, my bank froze my bank account and paid money from the account to my creditor, including my Social Security benefit. May the bank do this?

Yes. Usually there is a process for you to challenge the garnishment order before your bank pays money in your account to your creditor. You can challenge the garnishment by claiming that some or all of the money in your bank account is exempt from garnishment. However, in many cases, state law or the court may require a bank to freeze your account during these proceedings even if the account has money from exempt federal benefits. Banks and others that receive court orders generally must follow the directions of the order that is issued. If that happens you may not be able to take money out of the account until the court or your creditor makes sure that the money is exempt.

In some limited situations, Social Security and other federal benefit funds may be garnished, such as to pay a child support or alimony obligation. Also, if your bank account had both federal benefit payments and other deposits that are not exempt, the other money in the account may be garnished.

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What can I do if my bank account is frozen and it includes Social Security or other federal benefit payments?

You should review any notice or other information that you received about the garnishment. You should follow the instructions provided in the notice, including any deadlines.

Generally, state law requires that you must be told when a court issues a garnishment order. Usually, you will get a letter or other notice telling you that a court has issued a garnishment order for money in your bank account. The notice usually will give you information about potential exemptions and tell you what to do if you think money in your bank account is exempt from garnishment. Remember, the court and your creditor may not know if money in your bank account is exempt unless you tell them, because information about your bank account is private.

You also can call or write to your creditor to tell them that your bank account has money that you believe is exempt from garnishment. In addition, if your account contains only exempt funds, you can ask your bank to lift the freeze as soon as it is permitted to by law.

If you did not get a notice about the garnishment of your account, ask your bank for a copy of the garnishment order that it received.

If you are a customer of a national bank and your bank does not provide you with a copy of the order, or other documentation it has about the garnishment, you can call or write to the Office of the Comptroller of the Currency, Customer Assistance Group, at 1-800-613-6743.

If you keep having difficulty resolving the problem, you may wish to have an attorney help you. Sometimes you can find an attorney to help you at no cost through a local legal aid or legal services organization.

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After my bank froze my account, some of my checks were returned unpaid. May the bank impose an insufficient funds or “NSF” fee for these returned checks? What about a fee to freeze the account?

Generally, if permitted by your deposit agreement, the bank may charge these fees. However, if your account includes only exempt federal benefits payments, as a matter of good business practices some banks waive these fees or will refund them when the court order allows the freeze to be lifted. Be sure to ask your bank if it will refund – or not charge – fees in connection with a freeze on an account containing only exempt funds.

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A collection agency repeatedly tries to garnish my bank account. Time and again, when this happens, my bank account is frozen. I provided the collection agency appropriate notification that the account contains only Social Security or other federal benefit payments that are exempt from garnishment but they continue to try to garnish my account. May the collection agency continue to do this, even though it knows that the account contains only funds that are exempt from garnishment?

To see if your debt collector’s conduct is prohibited under federal law, such as the Fair Debt Collection Practices Act, you want to contact the Federal Trade Commission (FTC) at 1-877-FTC-HELP (1-877-382-4357) or visit its website at www.ftc.gov. You can file a complaint about a debt collector with the FTC through its website at http://ftc.gov/ftc/cmplanding.shtm.

Also, you may want to contact a reputable credit counseling agency. The National Foundation for Credit Counseling provides an online directory of credit counselors at http://www.debtadvice.org/takethefirststep/locator.html or you can contact them at 1-800-388-2227.

Additionally, you can contact the attorney general or the consumer protection bureau in your state for assistance or to file a complaint against a debt collection agency.

Finally, you may want to ask an attorney about your rights. Assistance may be available to you through a local legal aid or legal services organization.

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