Are Social Security And Other Exempt Funds Deposited In Bank Accounts Protected From Creditors? New York Makes Changes

01 Jul Are Social Security And Other Exempt Funds Deposited In Bank Accounts Protected From Creditors? New York Makes Changes

Each state has their own laws about what funds deposited in bank accounts are exempt and protected from creditor attachment. In New York, while Social Security and other exempt funds are protected, if a person’s bank account contains “co-mingled funds”, the creditor can attach the money deposited in the account. This is a particular problem for recipients of Social Security, SSD, Unemployment, or Worker’s Compensation income, who have other funds deposited into their account. These “other funds” can include a $25 check given as a birthday present, for example.

The NY State Senate and Assembly recently passed a bill that will automatically exempt the first $2500 of any account into which direct deposit Social Security is received regardless of co-mingling. The governor is expected to sign the bill into law, which will go into effect on January 1, 2009.

For persons who don’t get Social Security or another unearned exempt payment, the new law will also protect the first $1700 of any account regardless of source or co-mingling. This is designed to protect the working poor from restraints. NY already exempts 90% of earnings deposited into an account in the last 60 days. This provision makes that self effectuating. Both measures also contain cost of living adjustments.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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