A judgment lien is a ruling used to seize funds in order to pay off a debt. When a judgment lien is granted, few funds are protected from the lien, especially for liens filed by state and federal government agencies. However, the lien is not designed to remove a person's ability to pay for living expenses, and will typically affect only extra income. Some types of financial aid, especially governmental aid, are usually protected during the process.
Judgment Liens
A lien is a claim that a creditor holds against an asset in order to claim a debt owed. A judgment lien, however, is a claim formally created and approved by a court of law and is made in combination with an order to seize an asset and force repayment. There are many types of judgment liens, which are often constricted based on the individual state laws they followed. Judgment liens can seize houses, wages and money in bank accounts, among other things, but some financial aid is protected.
Bank Accounts
First, homeowners should be aware of the difference between money that is received as financial aid and money that is stored in a bank account. The judgment lien applies to money in an account; it does not differentiate based on where that money came from. This means that the money may have been safe when it was still a check being sent as financial aid, but once deposited with a bank that money can still be seized. Exceptions are certain retirement accounts and certain government benefits.
Protected Benefits
Generally, federal government benefits are exempt from judgment liens. This means that Social Security benefits and veterans benefits cannot be touched. Also exempt is money given through government student assistance and U.S. contractor compensation outside the United States. In addition to protect disaster assistance as well, the regulations also protect benefits received from specific jobs, such as civil service, railroad work, merchant seaman work and harbor worker positions.
Exceptions and Variance
There are some exceptions to these protected benefits. When a federal debt meets a federal benefit, the debt tends to win, which means that a lien for student debt or federal taxes can seize nearly any benefit. Also, exemptions for the amounts seized from bank accounts and state benefits can vary based on the state laws, although many states have limits in place to protect at least some funds.
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