When a person accumulates a large amount of debt, the creditor may take a number of aggressive actions to seize the money owed. Unemployed people may fear their only source of income -- unemployment benefits -- will be taken from them if they do not pay off their creditors. However, unemployment benefits are exempt from both garnishment by creditors and the seizure of funds from a bank account.
Unemployment Benefits
A person who is receiving unemployment benefits -- payments made by the government to people recently forced out of a job who are looking for work -- must still pay back the money he owes to creditors. Because a person is unemployed does not mean he is no longer obligated to pay back his debts. However, unemployment benefits, unlike most forms of income, cannot be seized by private creditors.
Wage Garnishment
Sometimes, a creditor will seek to garnish -- legally seize -- a portion of a person's paycheck or other regular income stream. This is done by winning a lawsuit against the debtor and serving his employer or income provider with a garnishment order. However, federal law prohibits creditors from forcibly seizing unemployment benefits. Any order served on a state unemployment agency would not be honored, even if it is issued.
Bank Account Seizure
Instead of garnishing a person's wages, some creditors attempt to take money out of a person's bank account. This is done by petitioning a judge to place a freeze on the bank account and withdrawing funds from it. As with garnishment, unemployment benefits placed in a bank account cannot be forcibly seized. However, funds in the bank account that came from other sources can be seized.
Exemptions
The only time unemployment benefits can be garnished or seized is if the person owes money to a government agency. State and federal government agencies generally are able to seize benefits issued by the government if they are owed money. A person may be in debt to the government if he owes child support or alimony or is late paying his taxes.
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