Does my bank have to tell the court or my creditors if my deposit account contains Social Security, Veteran’s, or other Federal benefits that may not be garnished? Will my bank still freeze my account?
If a bank receives a garnishment order, it must review any account you have at the bank. If the bank determines through its account review that you had certain Federal benefit payments direct deposited into your account within the review period, in most cases, the bank is required to automatically protect those funds.
However, the bank is not required by Federal law to tell the court or a creditor that your account contains protected Federal benefits.
State law or a court may require the bank to freeze money in your account that is not automatically protected even if that money came from Federal benefits exempt from garnishment, such as benefits received by check. Money that is not exempt under Federal law, such as a tax refund, also may be frozen. If that happens, you may not be able to take money out of the account until the court or your creditor determines whether the money is ultimately exempt from garnishment.
Usually, there is a process for you to challenge the garnishment order before the bank pays the money in your account to your creditor.