Exempt funds

[td1]

Hello,

My finances, because of medical issues are quickly becoming unmanageable. I am 66 years old and my income is from social security and a small pension. I understand my social security income is exempt from garnishment. I have set up a bank account that only social security money is deposited electronically and my pension check is mailed to me where I live. Given this it seems no one can go after my social security check and the pension check I can cash and use to run on. Does seem odd that my social security check is protected but my pension isn`t.

I live in Nevada and the law here it seems protects social security money that is directly deposited in checking accounts as long as it can reasonably be identified. There is a quirk in the law in that only $2000 is protected. Anything over that can be garnished. This does seem to contradict Federal Regulations.

I have read here that some folks put their money in debit cards for an additional layer of protection. I have considered the card recommended by social security and the amex serve card seems a good deal.

I was hoping that you folks would comment on all of this. Have I taken adequate measures to protect my income or should I just go ahead a use a debit card to prevent a creditor from doing something illegal to get my funds?

Thanks for the help.

[despritfreya]

Does seem odd that my social security check is protected but my pension isn`t.

Assuming your pension check is not from a federal job, the answer is “no - not odd”. Social Security and other federal benefits are protected under specific federal law that covers the funds from the source through to a traceble bank account (hence the reason keeping the funds separate from any other source is important). Most pension/retirement benefits are protected under state law but only at the source. Once the funds hit a bank account they become nothing more than “money sitting in an account” and can be subject to garnishment.

There is a quirk in the law in that only $2000 is protected. Anything over that can be garnished. This does seem to contradict Federal Regulations.

Your understanding is not correct. Fully traceable funds are 100% protected. What you are referring to is a relatively recent requirement that FDIC banks protect funds that “may” be from SS. The protection is limited and it is up to the depositor to prove all of the funds are protected. See:

https://www.fms.treas.gov/greenbook/guidelines_garnish0311.pdf

It sounds like you have things covered. You are cashing the pension check and saving the SS funds to the extent you can.

Des.

[td1]

Hello Des,

Thanks for the reply. Your response has made me feel a lot better about things. I have attached below the relevant nevada law that has confused me. It seems to say that any money in the account over 2000 is up for grabs regardless of source. I must be not be understanding the law correctly.

What do you think about debit cards as a way to protect funds?

Thanks for the help.






NRS 21.105  Certain amount in personal bank account not subject to execution; claim of exemption for additional amount; determination of exemption; immunity from liability for financial institution.
1.  If a writ of execution or garnishment is levied on the personal bank account of the judgment debtor and money has been deposited into the account electronically within the immediately preceding 45 days from the date on which the writ was served which is reasonably identifiable as exempt from execution, notwithstanding any other deposits of money into the account, $2,000 or the entire amount in the account, whichever is less, is not subject to execution and must remain accessible to the judgment debtor. For the purposes of this section, money is reasonably identifiable as exempt from execution if the money is deposited in the bank account by the United States Department of the Treasury, including, without limitation, money deposited as:

[despritfreya]

td1,

I do not know the application of the Nevada law. That would be a question for a Nevada attny. However, State law cannot trump Federal law so, to the extend it impairs a Federally granted exemption, it would be invalid. The question to me is whether or not the dollar holdback is less than or greater than the holdback required under Federal law assuming the funds are co-mingled. I do believe if the only funds in the account are clearly derived from SS (no other deposits but SS) the funds cannot be levied.

I do not subscribe to the idea of hiding funds in a pre-loaded debit card therefore I have no real comment on the use of such.

Des.

[td1]

exempt funds

Hello Des

I agree with you on the ss funds. I can`t see how they can be garnished if the only funds in the account comes from social security benefits. I will have to remember never to deposit anything else in the account and use cash for everything else. One thing I really like about this is the direct deposit and being able to pay bills electronically.

I have no real experience with debit cards but they may work better for folks who maybe are moving around.

Have to say all of this is new to me. Then $200,000+ in medical bills and an employer who lays you off after 15 years just when you really need them is also different. Guess it is my fault, didn`t plan well enough I guess.

Thanks

[LadyInTheRed]

td1, you need to carefully read all of NRS 21.105, including subparagraph 4. I am not familiar with Nevada law either, but I don't think you reading the law correctly.

I suggest you consult with a Nevada attorney to make sure you understand how to best protect your benefits and how to respond if a creditor does serve a writ of execution against your account.

NRS 21.105  Certain amount in personal bank account not subject to execution; claim of exemption for additional amount; determination of exemption; immunity from liability for financial institution.

1.  If a writ of execution or garnishment is levied on the personal bank account of the judgment debtor and money has been deposited into the account electronically within the immediately preceding 45 days from the date on which the writ was served which is reasonably identifiable as exempt from execution, notwithstanding any other deposits of money into the account, $2,000 or the entire amount in the account, whichever is less, is not subject to execution and must remain accessible to the judgment debtor. For the purposes of this section, money is reasonably identifiable as exempt from execution if the money is deposited in the bank account by the United States Department of the Treasury, including, without limitation, money deposited as:

(a) Benefits provided pursuant to the Social Security Act which are exempt from execution pursuant to 42 U.S.C. §§ 407 and 1383, including, without limitation, retirement and survivors’ benefits, supplemental security income benefits, disability insurance benefits and child support payments that are processed pursuant to Part D of Title IV of the Social Security Act;

(b) Veterans’ benefits which are exempt from execution pursuant to 38 U.S.C. § 5301;

(c) Annuities payable to retired railroad employees which are exempt from execution pursuant to 45 U.S.C. § 231m;

(d) Benefits provided for retirement or disability of federal employees which are exempt from execution pursuant to 5 U.S.C. §§ 8346 and 8470;

(e) Annuities payable to retired members of the Armed Forces of the United States and to any surviving spouse or children of such members which are exempt from execution pursuant to 10 U.S.C. §§ 1440 and 1450;

(f) Payments and allowances to members of the Armed Forces of the United States which are exempt from execution pursuant to 37 U.S.C. § 701;

(g) Federal student loan payments which are exempt from execution pursuant to 20 U.S.C. § 1095a;

(h) Wages due or accruing to merchant seamen which are exempt from execution pursuant to 46 U.S.C. § 11109;

(i) Compensation or benefits due or payable to longshore and harbor workers which are exempt from execution pursuant to 33 U.S.C. § 916;

(j) Annuities and benefits for retirement and disability of members of the foreign service which are exempt from execution pursuant to 22 U.S.C. § 4060;

(k) Compensation for injury, death or detention of employees of contractors with the United States outside the United States which is exempt from execution pursuant to 42 U.S.C. § 1717;

(l) Assistance for a disaster from the Federal Emergency Management Agency which is exempt from execution pursuant to 44 C.F.R. § 206.110;

(m) Black lung benefits paid to a miner or a miner’s surviving spouse or children pursuant to 30 U.S.C. § 922 or 931 which are exempt from execution; and

(n) Benefits provided pursuant to any other federal law.

2.  If a writ of execution or garnishment is levied on the personal bank account of the judgment debtor and the provisions of subsection 1 do not apply, $400 or the entire amount in the account, whichever is less, is not subject to execution and must remain accessible to the judgment debtor, unless the writ of execution or garnishment is for the recovery of money owed for the support of any person.

3.  If a judgment debtor has more than one personal bank account with the bank to which a writ is issued, the amount that is not subject to execution must not in the aggregate exceed the amount specified in subsection 1 or 2, as applicable.

4.  A judgment debtor may apply to a court to claim an exemption for any amount subject to a writ levied on a personal bank account which exceeds the amount that is not subject to execution pursuant to subsection 1 or 2.

5.  If money in the personal account of the judgment debtor which exceeds the amount that is not subject to execution pursuant to subsection 1 or 2 includes exempt and nonexempt money, the judgment debtor may claim an exemption for the exempt money in the manner set forth in NRS 21.112. To determine whether such money in the account is exempt, the judgment creditor must use the method of accounting which applies the standard that the first money deposited in the account is the first money withdrawn from the account. The court may require a judgment debtor to provide statements from the bank which include all deposits into and withdrawals from the account for the immediately preceding 90 days.

6.  A financial institution which makes a reasonable effort to determine whether money in the account of a judgment debtor is subject to execution for the purposes of this section is immune from civil liability for any act or omission with respect to that determination, including, without limitation, when the financial institution makes an incorrect determination after applying commercially reasonable methods for determining whether money in an account is exempt because the source of the money was not clearly identifiable or because the financial institution inadvertently misidentified the source of the money. If a court determines that a financial institution failed to identify that money in an account was not subject to execution pursuant to this section, the financial institution must adjust its actions with respect to a writ of execution as soon as possible but may not be held liable for damages.

7.  Nothing in this section requires a financial institution to revise its determination about whether money is exempt, except by an order of a court.

(Added to NRS by 2011, 1888)

[td1]

exempt funds

Hello Lady in Red,

Thanks for the help. I will definitely work through this at the level of detail you recommended.

On another matter. I set up a google phone account and have given it to all of my creditors to contact me. Also I changed my regular phone number to limit their ability to run me nuts. So far it has worked well. Every evening I just see who has called and keep a record but so far have only returned a few calls. What do you folks think about this?

Thanks

[td1]

Exempt funds and attachment

Hello,

I have spent several days researching my situation and it appears that I am pretty much judgment proof. All of my income is social security and a small pension. I am only depositing my social security payments in one account and my pension check is being mailed to me. I have a car that is 10 years old with over a 100,000 miles. Under state law the car is protected because its value is less than $15000. My house is protected since my equity is not that much and I homesteaded the house years ago. The homestead exemption is $550,000 in Nevada.

Having said this it seems odd that the legal system here and I guess elsewhere actually aids and abits unethical behavior and in my opinion illegal efforts by collectors to collect assets that are in effect exempt. As an individual if I aided illegal activities I could very well end up in jail but if the court does it guess nothing happens.

Let me explain. A creditor goes to Justice Court here and obtains a judgment against me on an unpaid debt for say $5000. The creditor files a motion for an examination of the debtor and the creditor finds out I have a checking account. I explain to the creditor that only social security money goes into the account. Also I tell the creditor I own a car but that its value is less than 15000 and is not subject to execution.

With this information the creditor gets a writ of execution from the court to go to the bank and collect my funds. The bank because of federal regulations ignores the court order. My car is a different matter. The sheriff takes the vehicle and then i have 10 days to serve the court a claim of exemption. So in both cases the court is enabling the creditor to take exempt assets. In the case of my banking account the federal government intervenes and does what the court failed to do. In the case of my car I have lost the vehicle for at least 2 weeks and hopefully I will get it back in the same shape they took it.

My point is the creditor knew or should know that his actions were wrong. The court should have never allowed this to happen and in the instances where a bank may make a mistake and release the funds I have to fight to get them back. Also if I do not file an exemption with the court within 10 days the property is given to the creditor.

What I have done to protect myself is obtain all the forms needed to deal with this and if the time comes am in a position to file the paperwork with the court to return any illegally seized assets. I say illegal seize funds because state law says these assets are exempt, and the court needs to take reasonable due diligence to ensure a creditor does not take such action. Also a creditor should be legally libel for harm their actions result in. It seems maddening to me that folks in this situation who are simply trying to survive have to prove their innocence(claim of exemption) after a creditor has been allowed to break state law.

Comments?

[Scarlett1234]

In the situation you described here ,does the judgement proof person has to pay for the legal cost from the law suit the creditor brought upon him if the debt is valid? Where did you get all the forms needed?