Laws Protect Federal Benefits from Garnishment

Authored By: Iowa Legal Aid

How Laws Protect Your Federal Benefits from Garnishment

Important law that protects federal benefits in a bank account from being frozen or garnished.

It can be difficult to manage day-to-day finances without a bank account.  However, sometimes people are afraid to put money in the bank.  They are afraid a creditor may try to take the money.  There are some important protections in the law for people who owe money, including a change made in 2011.  This article will explain the new law, and how to make sure its protections are in place. 

First, it is important to know that a creditor generally cannot try to take money from a bank account ("garnish" the funds), unless the creditor has already sued the person, and obtained a judgment.  Even then, the law protects some kinds of income from the reach of creditors.  There are a number of exemptions.  This article will not talk about all of them.  Iowa Legal Aid has information on its website about exempt property.  This article is about certain federal benefits (such as benefits from the Social Security Administration, Veteran's Administration or the Railroad Retirement Board) that are protected by the 2011 regulation. 

Even though these federal benefits are protected under both state and federal law, the creditor may still try to reach them.  Although the funds are considered "exempt," (protected from creditors), the creditor may still try to garnish funds in a bank account. In the past, those funds would have been frozen.  If that happened, the person would have to file a paper with the court, called a "motion to quash" in order to make the funds available again. Even though the exempt funds should be released by the court, the person may have had checks that were dishonored in the meantime, or the person may have been unable to withdraw money needed for the rent or other necessities.  To try to prevent that from happening, people were able to file a sworn statement ("affidavit") in advance, saying that the money is exempt.  However, in the past, the person might still have to ask the court to help get the money released.   

Why was there a need for this regulation?

A new Treasury regulation law came into effect in 2011  Its purpose is to keep the federal benefits available to the person.  The new regulation requires that banks protect certain federal benefits directly deposited into their bank.  That way, the federal benefits will not be garnished and frozen.  The person will not have to go to court to get the funds released.  The new regulation says that a financial institution (such as a bank or credit union) that receives a garnishment inquiry must do an "account review" to see if any federal benefits have been directly deposited within the prior 60 days.  If so, the account holder must be allowed access to at least the amount of the federal benefits.  This is so even if the money currently in the account has been mixed with other funds, even if those other funds are nonexempt.  So, this new regulation does a much better job of preventing the financial chaos created by an attempt to garnish federal benefits.  The person would not have to file anything with the court or wait for a court hearing.  The money will remain available to the person.

Do I have to do anything to make sure an account is protected?

A person who receives federal benefits may have to pay special attention to a few things.  The new regulation only applies if:

1.  the federal benefits are directly deposited into an account. 

2.  the funds are left in the same account they were directly deposited into, and not transferred into another account. 

How does this work?

Let's say that someone gets SSI.  If the SSI check is directly deposited into the person's savings account, the bank will have to protect it.  Creditors will be turned away.  If there are other funds in the account, the person will have access to the full amount of the SSI. But, if the person then transfers some of the federal benefits to the person's checking account, the funds in the checking account are not protected by the new law.  Once the funds are transferred to a different account, even if owned by the same person, the transferred funds are not protected by the new law.  The creditor may be able to garnish the funds, freeze the account, and force the person to go to court to get the funds released. 

What should someone who gets federal benefits do?

If the person only has one account (either checking or savings), the person does not need to do anything.  However, if the person has more than one account, the person should be sure to have the SSI or other federal benefit directly deposited into the account the person wants to protect. For most people, that would be the checking account, not the savings account. 

Are there any other situations where the protections may not apply?

The new regulation applies only to garnishment by a formal legal process.  Sometimes, a person may owe money to the bank or credit union.  The bank or credit union may try to "offset" money owed to it by taking the money owed from the person's account.  The new regulation does not deal with that situation. 

Also, while common federal benefits like Social Security and Veteran’s Benefits are definitely protected, certain benefits (for example military retirement) are not automatically protected.  Also, any money in your account over the protected 60 days worth of federal benefits is not automatically protected.

Finally, this automatic protection does not apply to certain garnishments where you owe the federal or a state government. 

Please keep in mind that in these situations, even where the garnishment protections are not automatic, you may still be able to get your money back by doing something like filing in court.  If you need to do this, it is important that you take action as soon as possible. 

You can call Iowa Legal Aid (1-800-532-1275) to ask for help if your bank account is frozen or garnished.

Iowa Legal Aid provides help to low-income Iowans. 


To apply for help from Iowa Legal Aid:call 800-532-1275. 
Iowans age 60 and over, call 800-992-8161 or 
apply online at
If Iowa Legal Aid cannot help, look for an attorney on “Find A Lawyer” on the Iowa State Bar Association website   A private attorney there can talk with you for a fee of $25 for 30 minutes of legal advice.
*As you read this information, remember this article is not a substitute for legal advice.
Last Review and Update: Dec 08, 2015

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