Legislation News:

Amended rule fights illegal garnishments
Published: January 02, 2010 10:00 pm

By FRED GOLDENBERG, Local columnist

Many people both young and old have fallen on hard times in the current financial climate. Credit card debt and home foreclosures have become commonplace. What's also become commonplace are the increased efforts by creditors to collect debt through garnishment of bank accounts. This has resulted in an increased concern over illegal garnishment of social security and other public benefits.

Social security and other public benefits are exempt from claims of judgment by creditors. But that hasn't stopped banks from simply granting a garnishment request from an account which has "commingled" funds -- where non-public and public funds reside together. Last year two-thirds of the nation's 12 largest banks violated the law by garnishing over $30 million from accounts containing government benefits from social security, disability, veterans' and survivor payments, according to the Social Security Administration's inspector general.

Michigan has responded to this situation by amending Michigan Court Rule 3.101. Michigan banks are now prohibited from freezing funds in accounts where only exempt funds are direct deposited and are easily identified as such. Public benefits can still be garnished where the debt involves alimony, child support, federal taxes or another federal agency, but beyond that are legally exempt.

Under the amended court rule when a creditor seeks to garnish money you have in a bank account, banks must act in a different fashion.

Now the financial institution is required to determine whether the account in question contains money derived solely from exempt funds. If that's the case, the institution may not freeze the account.
The institution must also provide affected debtors with a copy of the notice of garnishment as well as its response to the court concerning the nature of the funds in the account.

If this procedure is not followed, a debtor is entitled to file an objection to a garnishment.

The only way to really protect yourself is to have separate accounts, one for your non-exempt money and one for your exempt money so the bank can clearly see which funds cannot be touched and which ones can. To make this bulletproof you need to have your check directly deposited into a checking or savings account set up exclusively for your benefits, or you could sign up for the Social Security Benefit Card.
Set-up through Comerica Bank, Social Security beneficiaries will receive a Direct Express Debit MasterCard where they will have their SS retirement, disability and survivor benefits as well as SSI benefits automatically loaded each month. This instantly isolates the funds and marks them exempt.

Although this program is optional, it sure beats having to fight with your bank to get your money back after it's been sent to a creditor -- and you know they'll never send it back.

If you think you'd like to enroll in the new program all you need to do is call (877) 212-9991 or visit their web site at www.USDirectExpress.com.