Are Pension Deposits Protected From Federal Agency Creditor?

Do your Florida exemptions hold up when your judgment creditor is an agency of the U.S. government? One of my clients anticipates a judgment by the FDIC arising from his alleged violations of lending laws by a state bank the client previously owned and controlled.

The client lives in Florida. His primary asset is a pension from previous employment. He is retired and lives off his pension and social security. He understands, correctly, that the FDIC cannot garnish his pension plan. But, he is concerned that the government agency can garnish the pension distributions when they are deposited in a bank account.

Florida case law provides that money in a bank account cannot be garnished if the debtor traces the money to pension distributions. However, most federal appellate courts hold the opposite- that, once pension proceeds are exposed to writs of garnishment after they are deposited in the bank. The client believes that because federal law preempts state law that his pension distributions would be at risk once deposited in a bank.

I believe that the client’s pension payments would remain exempt if deposited in a Florida bank. The general rule is that federal agency money judgments are collected pursuant to state law procedures and exemptions. The exceptions are when a federal agency is given by statute special collection remedies such as lien rights (IRS) or disgorgement remedies (SEC). The FDIC would have to collect its judgment through the Florida court system where this debtor can assert his exemptions provided by Florida law, including the exemption of money traceable to a qualified pension plan.

Page last updated on May 22, 2020

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