Debt Collection Defenses - Social Security benefits

Authored By: Legal Aid Services of Oklahoma, Inc. LSC Funded


This short video talks about some of the defenses to a lawsuit attempting to collect on a debt you owe.
If you get sued, do not ignore court papers! Talk to a lawyer as soon as possible.

Creditors cannot garnish Social Security benefits; some debts are 'too old' to collect.
These are just examples of defenses you may have if you are sued for a debt or if your bank account is garnished. Talk to a lawyer as soon as you can. The lawyer may be able to help you get the garnishment stopped and your money back.

Sometimes when a creditor goes to court and gets a judgment against you, the creditor asks the bank to 'garnish' or take the money from your account. Social security benefits cannot be garnished or taken by the bank for a creditor. By law that money is not allowed to be taken.

Here's how this happens:

  • A creditor goes to court and gets a judgment or "order" for payment.
  • The creditor then files a garnishiment on your bank account and expects a bank to comply with that order.
  • The banks have to comply with court orders. The banks risk being responsible for the amount of the judgment if they do not comply with the court ordered garnishment of your account. But the bank may be aware that your account only has deposits from social security benefits.

But, a debtor who receives social security benefit payments that are exempt from garnishment, expects the bank to refuse to pay the creditor funds that are protected.

In response to court ordered judgments, banks continue to freeze accounts containing exempted funds. This will be even more of a problem when Social Security goes paperless and requires all funds to be deposited in a bank account instead of issuing checks.

New Social Security recipients must change to direct deposit of funds by March 1, 2011. If you are already getting Social Security benefits, you have a couple of years to change to the direct deposit system.

Seniors are especially vulnerable to bad collection efforts.
If this happens to you, pay for your basic needs of food and housing even if you are getting debt collection calls or threats to sue. Then call to talk to a lawyer about the law suit or the garnishment.

Federal and state law may those who become unable to pay their debts. In Oklahoma, a creditor with a court order to collect a money judgment cannot touch most pensions or take consumers' homes unless you don't pay your mortgage.

Sometimes there are 'exemptions' or reasons that the bank cannot garnish your account. It is up to you to tell the creditor or the judge that your bank account may be exempt. Banks often automatically freeze accounts which only have Social Security benefits. It is up to you to file exemptions at the county courthouse have a judge hear your case. It can take 5 to 10 days before you may get access to the money in your account.

When funds from more than just social security benefits are combined in one account, it is impossible for a bank to know what funds deposited in the account are exempt from being garnished and what should be paid to the creditor.

Meanwhile, a proposed federal regulation is being considered that would place more responsibilities on banks to determine whether any federal benefit payments were deposited within the prior 60 days, not freeze accounts so quickly or garnish entire accounts. That regulation may take effect as the end of this year (2010).

Until and after then, the best thing a consumer can do is place protected income in a separate account and not mix it with unprotected income.

For example, if a retiree receives $1,000 a month in Social Security and $500 in rental income, the Social Security income should be in a different account than the rental income.

This will help you know and explain to a judge or bank, why the garnishment of the account should not be allowed.

Last Review and Update: Aug 16, 2010

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