If your Social Security, SSI, VA, railroad or federal civil-service retirement benefits are directly deposited, your bank must protect up to two months of those deposits from a creditor's garnishment without you having to ask.
When a bank receives a garnishment order, it must review the account within two business days and, if covered federal benefits were directly deposited in the prior two months, leave the 'protected amount' fully accessible. That is the lesser of the benefits deposited in that lookback period or the account balance. Orders from the United States or a state child-support agency carrying a specific federal notice are excepted.
- Citation
- 78 Fed. Reg. 32099 (May 29, 2013) (codified at 31 C.F.R. pt. 212)
- Court or agency
- U.S. Department of the Treasury, SSA, VA, RRB and OPM
- Date
- May 29, 2013
- Law
- Other
Summary
The federal benefits garnishment rule, issued as an interim rule in 2011 and finalized in 2013, requires banks to look back two months and protect directly deposited federal benefits when a garnishment order arrives. The rule has not been amended since 2013, and in December 2020 Congress used it to protect second-round stimulus payments.
Background
Federal law has long made Social Security, SSI, VA benefits, Railroad Retirement benefits and federal civil-service retirement benefits largely exempt from creditors. In practice, though, when a creditor served a garnishment order on a bank, the bank often froze the entire account, and beneficiaries had to go to court to get their own money released.
Treasury and the benefit agencies (the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board and the Office of Personnel Management) issued an interim rule in 2011 and a final rule on May 29, 2013. It is codified at 31 C.F.R. part 212. Our review of the Federal Register found no amendments to part 212 since 2013.
What changed
- Automatic account review. Within two business days of receiving a garnishment order, a bank must check whether a covered federal benefit was directly deposited during a two-month “lookback period.” Treasury marks these deposits with a special code so banks can identify them.
- Protected amount. If a benefit was deposited, the bank must calculate the “protected amount”: the lesser of the total benefits deposited during the lookback period or the account balance at the time of review. It must give the account holder “full and customary access” to that amount and may not freeze it. The account holder does not have to claim an exemption first.
- Notice. The bank must send the account holder a notice explaining what happened.
- Exception. The automatic protection does not apply when the garnishment order comes from the United States, or from a state child-support agency, with a “Notice of Right to Garnish Federal Benefits” attached.
- Limits. The rule protects only benefits paid by direct deposit. Funds above the protected amount are handled under the bank’s normal procedures, although they may still be exempt under other law.
Our take
Part 212 is one of the most practical consumer protections in federal law. It works without a court hearing and without the consumer doing anything.
Its limits matter, too. It covers only directly deposited benefits from the listed agencies, and only two months’ worth. Someone who saved benefits over a longer period, or who receives benefits by paper check, may need to assert exemptions in court.
What it means if you’re sued in Texas
In Texas, creditors cannot garnish wages for ordinary consumer debts, so after a judgment they often try to garnish bank accounts. If you receive Social Security or VA benefits by direct deposit, part 212 should protect up to two months’ worth automatically.
If more of your money was frozen, you may be able to show that it is also exempt, but deadlines in garnishment cases are short. Gather your bank statements and benefit award letters right away.
If a creditor has garnished an account that holds your benefits, a free case review is available.
Takeaway
If your account is frozen, ask the bank for the protected amount it calculated. Money above that amount may still be exempt, but you may have to claim the exemption in court.
Sources
Primary authority
- Final rule (Federal Register, 78 Fed. Reg. 32099)
- 31 C.F.R. part 212 (eCFR)
- Guidelines for Garnishment of Accounts Containing Federal Benefit Payments (Treasury, Bureau of the Fiscal Service)
Secondary sources
This summary and analysis are general information, not legal advice. Later decisions, amendments or agency actions may change the law; check the current status before relying on it.