Many veterans, retirees, and people with disabilities receiving federal benefits find themselves in financial trouble and owing their creditors money. A new federal rule was recently passed that will protect the bank accounts of those receiving federal benefits from being garnished by creditors. The rule is known as the Treasury’s “interim final” rule and will be in effect as of May 1, 2011.
At its most basic, the rule will block creditors from being able to freeze or lock up finds from those bank accounts containing funds that cannot be garnished with court orders. The owners of these accounts count on these funds for their daily survival more often than not. The protected funds in these accounts are derived from:
- Department of Veterans Affairs (VA) benefits;
- Social security benefits;
- Social Security Income (SSDI); and
- Other federal benefits.
If creditors are able to lock a person’s bank account with a court order, that person will not have access to the money in that account. For those veterans and others depending on that money for their daily needs, being frozen out of their account presents a severe issue. This is despite all the above listed benefits being immune from creditor seizure under federal law.
This new rule will not allow banks to freeze the essential funds within the bank account and puts the onus on the bank to determine which funds are protected when complying with court ordered garnishments. If protected funds are present in an account, banks will be forced to make 2 months worth of benefit payments available to the account holder. It is possible future extensions of the rule could cover military retirement pay as well.
If you are a disabled veteran who has been denied disability compensation or have not yet applied for benefits from the VA, contact Veterans Help Group. You may be entitled to certain programs and benefits so contact our veterans disability rights firm today.