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What Funds Are Exempt from a Bank Account Seizure?
You have deficiency judgments against you, and creditors are seizing funds from your bank account to pay off your debt. Thankfully, some funds you receive can be exempt from seizure. Here’s an overview of what funds are protected and their exemptions:
First Two Months of Income
One of the first funds that are exempt from a bank account seizure is the first two months of your income, or the first $2,500. This exemption is to allow you to be able to meet basic needs like food and shelter.
Social Security and Supplement Security Income (SSI)
Federally received funds via SSI are exempt from seizures and levies. These funds can only be seized if the Secretary of the Treasury puts a levy on your account for unpaid federal taxes or child support.
If you receive disability benefits from a private company, these funds are protected based on the state you live in. Even if your private disability benefits can be seized, the Consumer Credit Protection Act protects 25 percent of funds received. It’s important to remember that these benefits differ from those you get from the federal government, as previously discussed.
As a veteran receiving benefits, your funds are generally safe from seizure. If you owe money for a debt like a Kansas City home loan, creditors cannot claim your benefits. However, if you owe federal taxes or child support, veteran benefits can be garnished depending on what type of benefit you have. For example, if you have a VA disability compensation, it cannot be seized.
Student Loan Aid
If you are currently receiving student loan aid, these funds cannot be seized from your account—but only if they are federal. If you receive funds through a private organization like Wells Fargo, they can still be levied.
Damage from natural disasters like a tornado or hurricane often cannot be avoided. If you were the victim of a natural disaster and received FEMA aid, the aid you receive is fully exempt from seizure. This type of aid is meant to provide help to people who have had damages and losses in a presidentially declared disaster area that isn’t covered by insurance.
While retirement benefits are exempt from seizures but only if they are qualified under the Employee Retirement Income Security Act (ERISA)—and even then, there are exceptions. For example, if you owe child support or took distributions out of the plan and put them into a savings or checking accounts, creditors can still seize the funds.
Remember, in order to get the most protection for these funds, it’s best to have them directly deposited into your account as they cannot be automatically frozen. If you do choose to receive benefits as paper checks, your funds can still be protected, but you may need to talk to your lawyer to discuss your options.