Garnishment of Accounts Containing Federal Benefit Payments
7 Pages Posted: 16 Jun 2010 Last revised: 11 Jul 2013
Date Written: June 1, 2010
Abstract
Despite the fact that federal benefits are exempt from garnishment and other legal process, beneficiaries and their depositary institutions still struggle with garnishment orders on a regular basis. This comment supports adoption of a rule proposed by the United States Department of Treasury that creates a safe harbor for beneficiaries for benefits paid through direct deposits and also for depositary institutions so that they may act without fear of penalties for failure to obey garnishment orders to the extent that the proposed rule applies to the deposit. In addition, this comment calls for strengthening the protections for beneficiaries and depositary institutions, and also calls for the protections to be extended to prevent banks' use of set off rights they may have by contract with beneficiaries to the extent of the proposed rule's reach.
Keywords: exempt federal benefits, garnishment, depositary institutions, direct deposits, child support and alimony, safe harbor, automated clearing house transfer
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