Creditors are known for their bullying ways when it comes to attempts to collect their money. They often harass people with phone calls, make threats, report negative information to credit agencies and have even garnished people’s wages. It is a situation all too familiar to some who have ended up with overdrawn accounts and delinquency fees, once their bank accounts were frozen by creditors. Having your wages garnished can be frustrating for anyone, but what about those whose only source of income is the limited amount provided by Social Security or veteran’s benefits?
What the Government is doing about it
Until recently, the responsibility of protecting a bank account from being seized and having wages garnished fell solely on the shoulders of the debtor. Even if the debtor had been monitoring the situation, the creditor could still obtain a court order in order to pressure the bank to relinquish their money. “It was up to the account holder to go to court to ensure the funds were protected,” U.S. Treasury spokesman Matthew Anderson said before the rule, ” Now, consumers won’t have to do anything to protect their money.”
A few weeks ago, a new federal law was passed that protects people receiving Social Security benefits from having their wages garnished by creditors. The law states that when a bank receives a garnishment order, it must review the account to determine if there are any funds that are protected from garnishment, before any court order can be executed against the account. Wages that are earned as a result of Social Security, or other federal benefits, are protected under this new law.
There are a few exemptions to this new law that allow for any type of wages to be garnished. Wages of all types may be garnished for the purposes of back due child support, back taxes, unpaid student loans and any unpaid overdraft fees with a bank.