According to an article written by creditor and collection attorney Jorge Abril, the federal government has issued a new regulation which makes it more difficult for judgment creditors to improperly garnish bank accounts containing government benefits. A variety of government benefits are exempt from creditor garnishment under federal law including, for example, social security, VA benefits, and civil service retirement. Nevertheless, if and when a Florida judgment creditor services a writ of garnishment on the debtor’s bank account the bank is likely to freeze all money in the account regardless of origin. A debtor who is living on social security and other federal payments has to go to court, often at significant expense, to assert his exemptions of his federal benefits and get the garnishment released.
Mr. Abril’s article explains that the new regulations effective May, 2001, requires a bank, upon receipt of a writ of garnishment, to conduct its own inquiry into the source of the funds in the garnished account, and if it determines that the account contains Federal benefit payments, to release the freeze on two months’ worth of payments immediately, without any showing by the debtor.
This is welcome protection. Maybe Florida will pass rules requiring banks to likewise investigate whether money in a debtor’s account represents proceeds of assets protected under Florida law such as annuity proceeds or retirement distributions. Unless banks are required to make reasonable inquiry about the source of debtor’s funds some creditors use bank garnishments against exempt money as an harassment tool as opposed to a legitimate collection tool.