New Rule for Federal Exemptions

On May 1, 2011, a new federal law became effective that will enhance and improve protection for exempt funds if your bank account is garnished. Garnishment is a way of collecting money that is a result of a court case, debt or something of that nature. The most common type of garnishment is wage garnishment, where money is taken from the person’s wages. Problems arise because it is your individual responsibility to claim federal funds as exempt so that your federal benefits will be protected. In many cases, banks freeze accounts in accordance to a court order and you must then go to court to have your bank account released. If funds are exempt, that means that the bank cannot freeze them. The law that is now in effect will cause an electronic tag to be issued on deposits made electronically by governmental agencies.

Because of this, banks will be required to exempt all tagged deposits made two months prior to the account freezing. This protects the deposits from garnishment. Funds that are tagged include social security, supplemental security income, VA benefits, federal railroad retirement and federal railroad unemployment. Also included are sickness benefits, federal civil service retirement and federal employee retirement systems benefits. This in turn takes the responsibility of manually getting these funds exempt off the consumer. Also, banks are not accountable to creditors for not turning over tagged funds.

The National Consumer Law Center, a nonprofit organization focusing on consumer issues, says that over 1 million people have exempt funds garnished each year. These people are many times sick or elderly. Garnishment may cause these people to not be able to get food or medicine if their accounts are frozen. The new federal rule covers al federally chartered banks and credit union. The do not limit the amount of money that can be tagged, but it has to be electronically deposited if it is to receive the tag. Checks that are deposited manually can still be exempt, but they do not get the electronic tag. Because of that, it once again is your individual responsibility to claim it as exempt or the bank has no obligation to protect these funds from garnishment.

There are many laws in place to protect the consumer, but many Americans are unfamiliar with these. If you are at risk of bank or wage garnishment because of a judgment that is placed against you, you should contact a bankruptcy attorney to find out how the law can work for you. The Rosenstein Law Group has attorneys that specialize in these cases. They know how difficult situations like these are, so they are ready to answer your questions and offer their support and solutions. Their lawyers are knowledgeable and experienced. They know how to handle your case. You can contact them 24 hours a day, seven days a week and someone will be ready and waiting to take your call at 480-248-7666. Their qualified staff is waiting to help you if you will just pick up the phone.



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