New Rules Regarding Garnishment Of Federal Funds

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Starting May 11, 2011, new rules have gone into effect regarding the way creditors can garnish funds from bank accounts of debtors. These rules provide more protection to individuals who are receiving benefits from the federal government.

The Rules for Garnishment of Federal Funds
When a creditor is awarded a judgment against a debtor who has defaulted on their loan, the creditor can collect their money in a number of ways. Sometimes, creditors are given the right to garnish the money in a debtor's bank account up to the amount that was owed on the debt. The rules for garnishment say that money cannot be garnished if it comes through federal programs such as Social Security, SSI, or benefits for veterans.

Even though this rule was in place, one of the problems with the system was that when the order to allow garnishment reached the banks, they made no differentiation between funds that were allowed to be garnished and those that were protected. All of the money in the account would be frozen, often leaving people in precarious financial situations. The individual who owned the account was allowed to file paperwork with the bank to stop them from turning over protected money, but if they did not do so, the bank would allow the creditor to garnish the balance of the debt without regard to which funds were protected and which were allowed to be taken.

The Bank's Responsibility
When the rule goes in to place, the bank will now have to check if there were any deposits from federal programs within the preceding two months. It is now be the bank's responsibility to determine which funds are available to be garnished and which are federally protected. Instead of the debtor being forced to file a petition to unfreeze protected money, the new rule dictates that the bank must do that themselves, independent of whether the accountholder is aware of the rule or not.

How This Affects You
Although the accountholder may still petition to have these types of deposits excluded from being garnished, the new rule does not affect any types of federal benefits that were deposited into an account through a check or funds that were deposited before the two-months before the garnishment order was issued.

About the Author:
If you or someone you know has had their wages unfairly garnished by a debtor, contact Chicago attorneys Johnson, Westra, Boecker, Whittaker & Newitt P.C. for consultation.



Article Originally Published On: http://www.articlesnatch.com


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