When a debtor owes money to a creditor, the creditor has a number of options for how he can go about collecting the money. While a creditor may initially send the debtor letters or make phone calls requesting payment, if this is ineffective he may choose more severe measures. These can include petitioning a court to allow the creditor to garnish the debtor's income or freeze his bank account.
Federal Law
Federal law prohibits creditors from seizing all forms of Social Security benefits. These include SSI, survivor's benefits, retirement and disability. This includes money that a court has ordered you to pay. If the creditor seizes Social Security benefits, she may be in violation of the federal Fair Debt Collection Practices Act and subject to a fine.
Garnishment
In some cases, a creditor may attempt to garnish a person's income to pay off a debt. To do this, a creditor must receive a court order from a judge that grants the creditor permission to seize a portion of the debtor's income. The creditor will then present this order to the person's employer and ask that the money be set aside. Because seizing Social Security benefits is illegal, a judge would never grant this order.
Bank Accounts
A creditor may also attempt to collect what he is owed by petitioning a judge to allow a bank account to be frozen and funds extracted from it. If the judge grants this motion, the creditor can then approach the debtor's bank and ask that the account be frozen. Although the judge may grant this motion, the creditor is still prohibited from freezing the account or removing money from it if the money being frozen derives from Social Security benefits.
Wrongful Seizure
In some cases, a creditor may freeze a bank account that includes income like Social Security benefits, which are exempt from seizure. This is illegal. To remedy the situation, the debtor should petition a judge to remove the freeze. To do this, the debtor will likely have to provide documentation proving that the frozen account is made up of Social Security and not other funds.
Federal Payments
The only exception to the rule that Social Security benefits are exempt from seizure is if the person to whom the debtor owes money is the federal government. The federal government, which issues Social Security benefits, is legally allowed to garnish a percentage of these benefits if the recipient owes child support payments; federally subsidized loans, such as student loans; back taxes; or money resulting from the overpayment of back taxes.
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