A new Oregon law which went into effect on January 1, 2010 protects exempt public benefits and retirement benefits from garnishment when the funds are deposited into a bank or credit union account by direct deposit or electronic payment. The new law is found in Chapter 430, Oregon Laws 2009.
The following benefits are protected:
Social Security and SSI
Public assistance payments
Payments from a public or private retirement plan
Black Lung benefits
If the payments are readily identifiable, the bank or credit union must protect any money in the account up to the amount of protected benefits received by direct deposit or electronic transfer in the prior calendar month. Some of these payments, such as Social Security or Veterans Benefits, may already be identified on your bank or credit union statement, but others, such as retirement plan payments, may not be easily identified unless you notify the bank or credit union.
In order to make sure that the funds may be identified, the law requires banks and credit unions to provide an affidavit form that customers may use to notify the bank or credit union to protect the funds. An affidavit form and instructions prepared by Oregon legal services programs are available here:
AFFIDAVIT — “Affidavit Notifying Financial Institution of Income Not Subject to Garnishment”
INSTRUCTIONS — “How to Tell a Financial Institution that You have Deposits Protected from Garnishment
Benefit recipients should fill out the affidavit form following the instructions and take it to their bank or credit union. It is a good idea to do this even if the benefits are already identified on your bank statement just to make sure that the funds will be protected.
The new law also prohibits banks and credit unions from charging garnishment fees to the debtor if no funds are garnished from the debtor’s account.
Prior to January 1, 2010, these protected benefits were already exempt from garnishment under federal and state law, but any bank account could be garnished even if it contained such exempt benefits. The debtor then had to file a Challenge to Garnishment and go to court to recover the benefits. The court process often took several months during which time the debtor did not have use of their benefits for food, shelter, utilities, medical needs and other expenses. Even if the debtor eventually recovered the funds, they could owe hundreds of dollars in bank garnishment fees, overdraft fees, and late charges, and could face eviction, utility shut-offs and other hardships due to the loss of their benefits.
Under the new law, if the account contains more than the amount of benefits received in the prior month, the excess amount will still be garnished, and the debtor will still have to file a challenge to garnishment to recover any amounts which are exempt. For example, if a person receives direct deposit of Social Security benefits in the amount of $1,000 per month, but has a total of $1,500 in Social Security in their account when the bank receives the writ of garnishment, the bank will protect $1,000 and pay $500 to the creditor. But since all Social Security benefits remain exempt when placed in a bank account, the debtor can file a Challenge to Garnishment to get back the $500 that was paid to the creditor. On the other hand, if the $500 excess amount did not come from Social Security or other exempt benefits, the creditor would be entitled to keep the garnished funds.
Following is additional information which may be downloaded:
Notice of exempt property and instructions for challenge to garnishment
Challenge to Garnishment form
Information for Debtors – How to protect your assets from creditors in Oregon
Information courtesy Lane County Legal Services Programs. Thanks to Anna Keenan-Mudrich for the tip.