New Protection for Federal Benefits

Effective May 1, 2011, there is more protection for retirees, veterans and disabled persons who use bank accounts for their federal benefits such as Social Security, SSI, VA and other federal benefits.

Even though federal and state law protects these benefits from seizure by private creditors, all too often creditors obtain court orders that allow banks to freeze bank accounts containing protected funds. A beneficiary may be unable to get urgently needed funds for weeks or months.

Often, the paper work and procedures needed to end an illegal freeze prove too daunting for a recipient, so that the bank turns over supposedly "untouchable" funds to the creditor.

The Treasury Department's new rule requires all banks to determine whether an account contains protected funds. If an account contains protected funds, the bank is required to protect two months of benefit payments from attachment. Protection of more than two months of benefit payments still requires additional court filings by the beneficiary.

This information was adapted from a press release issued by the National Consumer Law Center, www.nclc.org. It is reprinted with permission from The Alert, a publication of The Legal Aid Society of Cleveland.