Automatic exemption for Social Securiy deposited in checking.

[rta]

If you are responsible to pay, you have already incurred the debt. You can list it as a contingent debt on your petition and notice the hospital (or doctor, or whoever sent the bill). It will be discharged even if at the time of filing you don't know for sure whether you will be responsible to pay the debt. If, however, you think you will be incurring additional medical expenses, you should wait to file until your care is complete.

There isn't supposed to be a payment obligation on my part. I'm not sure why they sent me that bill more than a year ago. However, they might follow up on it someday, who knows? If I do file for BK anytime soon, I would include that bill.



I suggest you either go to a branch and talk to somebody or call and ask to speak to a branch manager. The people who answer the phone are probably the least knowledgable about this kind of issue.

I've talked to a live person at one credit union, and to supposedly knowledgeable people over the phone. The next step would be to look for a branch manager. Of course, the branch manager may not know much, either, but it's worth a try.

[tobee43]

You are correct that it is not the bank's job to determine whether a trust is irrevocable. The bank can't make the trust irrevocable, but their records may show that it is. They should get that kind of info from the trustee. When the account was opened, the trustee probably signed a trustee's certificate of trust on the bank's form instead of supplying his own certificate. Either the trustee checked a box saying the trust is irrevocable or the bank officer filled the form out for the trustee and the trustee did not correct it before signing. Just like debtors should read their BK petitions before signing them, a trustee should look at all forms that they sign and make sure the info is correct.

It makes sense that SS deposits would not be made to an irrevocable trust. But, as you have experienced, they are deposited to revocable trust accounts all of the time.

This is way off topic, so let's not discuss it further here. Tobee, it sounds like you probably have the whole situation under control. But, if you have any questions about dealing with California trusts and banks, now or in the future, post them here: http://www.bkforum.com/forumdisplay....s-Wills-Trusts. I will try to help (If I don't respond, send me a PM to let me know you posted a trust question in case I miss it).

yes WAY off!! LOL!! sure i do way under control! one would hope i would know they can't do that!

my point is many bank employees do not know what the heck they are doing, and many times give information or do things that are completely incorrect and actually in some cases unlawful. maybe not their intent, however, it many times certainly makes a mess for people to have clean up themselves. it's just important in many situations to be careful about how one's ss payments are handled.

[GoingDown]

You might find the information in this thread to be helpful:

http://www.bkforum.com/showthread.php?67251-Exempt-funds/page2

GD, all of your questions/concerns were answered in detail in the references I provided. But I'll try to answer your questions anyway.

What if the checking account has 61 days of exempt direct deposit funds?

The purpose of these rules is protect two months of exempt income. Most government programs direct deposit on the same day of the month every month. The actual rule looks back two months based on the day preceding the day of review by the bank. So for two 31 day months, the lookback period would be 62 days.

For example, the bank receives a garnishment order on Sept. 1. They process the order on Sept. 2, they are allowed 2 days to process. They look at all exempt deposits from midnight on July 1 to midnight on Sept 1 (62 days) to determine the protected amount. Any deposit on Sept. 2 is not part of the levy, since the levy is only good for the day it was received by the bank. The protected amount is whatever money is on deposit on Sept. 1, up to the two month limit.



Wouldn't you have to withdraw any money deposited before the last 60 days?

Any amount of money that exceeds the two month lookback is not protected. So yes, if you wanted to avoid the usual court exemption process for removing a banking freeze and garnishment of your exempt funds, you would not leave more than two months income in your account.

And who determines this? Someone at your bank? The court?

The bank determines the amount of protected funds, based on these very specific rules. Each ACH exempt transfer will be encoded with an "XX" in the header name, so anyone that can recognize XX can easily determine the protected amount. In reality the banks are already modifying their programming to make this process automatic. It's estimated that 95% of all banks will have this process automated by the time the rules go into effect in May.

The courts have nothing to do with this - that is the whole idea of the new regulations - to keep the court exemption process out of the picture. The banks also have a safe harbor protection against any court action. The bank only needs to notify the depositor and the court that the funds were exempt, and hence the garnishment was rejected. The judgment creditor does not need to be notified by the banks why he didn't get his money. I like that part.

Does it say anything about what fees the bank is allowed to charge you for responding to a court order (garnishment)?

Yes, the banks will not be allowed to charge any fees to the account holder for responding to the court order, unless there is unprotected money in the account. If a couple receives $4000 in social security over a two month period, then only funds over the $4000 will be subject to any bank fees.

I know my last checking account was at a bank which explicitly stated in writing that they would charge a fee of $75 just for responding to a court order such as a garnishment. I have heard of some of them even charging their attorney's hourly rate for responding to the court order, which can easily wipe out a small checking account balance.

Times are changing GD. There will be no bank fees or attorney fees that can be taken from the protected amount of funds in the account.

Your bank still has to fill out paperwork and respond to the court. They often have their lawyer look at it and respond to it, and well, they have to pay someone to do these things.

So what? First the process will be automated so the janitor could handle the paperwork. The account holder is the victim here, and should not be charged for someone else attempting to break the law. These new regulations are clear and fair. A bank can always close your account after you receive a garnishment, claiming you are not a profitable customer. There will always be another bank around the corner willing to take your US Treasury direct deposits. An impact analysis was done on how these rules would affect smaller banks and credit unions, for example. And it was determined that there would be no measurable effect on their profits. You can read all about all the 500+ questions these Agencies considered before this final rule making. These regulations were carefully researched after banking industry feedback, and the banks generally agree that this kind of system to prevent abuse of the disabled, the elderly, and veterans, was needed.

While it is a step in the right direction, I would still be wary of ever leaving more money in a checking account than you can afford to lose, once you have a judgment against you.

That's up to you. You won't lose two months of exempt direct deposit funds no matter how wary you are. You don't have any exempt funds, and being younger you don't mind the inconvenience of an all cash underground lifestyle. Seniors in their 70's and 80's and 90's should not have to put up with that kind of crap. This law gives some peace of mind to retirees, the disabled, and veterans who depend on their exempt monthly government benefits to survive.

These new regulations also do not require a depositor to notify a bank in advance that their deposits are exempt. The exempt status is clear from the ACH coding, and the banks only have to follow the regulations from the regulatory agencies that determine the banks existence.

Also, these rules will trump any state laws about multiple day garnishments. The garnishment can only be effective on the day the bank receives the court order. No further days of levies will be honored if the account has exempt deposits. This is already the case in Oregon, but in some states the creditor can keep stealing exempt funds after the first day using the original garnishment. The states will need to change their statutes now to make this multiple day levy of exempt funds illegal.

These federal regulations are the minimum requirement to protect exempt funds. If a state has further rules that provide more protection, then the state rules still apply. In my state the protection goes up to $7,500 per account holder, for example.