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Freezes and Seizures of Your Bank Account

A creditor can get a court order seizing money from any of your bank accounts to repay a judgment debt. Certain federal benefits, such as Social Security, SSI, and VA benefits, that are deposited in your bank account are protected (with exceptions for child support and debts owed to the federal government).

Federal law requires your bank to protect certain benefits that are direct-deposited into your account within the last two months. The bank is prohibited from turning over any Social Security, SSI, or VA benefits deposited within the last two months. The bank must send you a notice telling you what it is doing, but you do not have to take any steps to protect these benefits.

Social Security, SSI, or VA benefits deposited into the account more than two months beforehand are also protected—but the protection is not automatic. You will usually have to fill out papers and possibly go to court if you need to protect more than the last two months of benefits.

An easy way to protect all your Social Security, SSI, or VA benefits is to have them loaded onto a Direct Express prepaid card, instead of sent to a bank account. Those funds will then be automatically protected, no matter when they were received. You can sign up for the Direct Express card by calling 1-800-333-1795 or by visiting www.USDirectExpress.com.

As discussed below, other protections for your bank accounts require you to fill out papers and possibly go to court. For example, states usually protect workers’ compensation, unemployment compensation, and state employee retirement benefits from seizure, and some even allow you to protect wages deposited into your bank account. Some states have laws that protect a set amount in a bank account, such as $200 or $1,000, regardless of the source of the funds.

When a creditor obtains an order to seize your bank account, the bank typically will freeze the funds in your account, giving you a short period of time to claim that the funds are protected from seizure. The burden is on you to show that the funds are protected.

Usually you will find out that your funds have been frozen when you try to withdraw money, write a check, or use your debit card. Social Security, SSI, or veterans benefits directly deposited into your account during the last two months cannot be frozen. But other benefits can be frozen, and you must act quickly to show that at least some of the frozen funds are protected by law and should be unfrozen.

If some of your money on deposit is protected from seizure but some isn’t, it may be helpful to set up two accounts, one of which receives just protected funds. That way, it’s easier to prove that all the money in that account is protected. Spend the money in the unprotected account first.