Sunday, May 3, 2009

Real Bankruptcy, Real Life: Are my Social Security benefits safe from garnishment?

I'm introducing a new blog series today that I'm calling "Real Bankruptcy, Real Life." These are going to be blog posts about real-life questions that arise during the course of my practice. If you have a question you'd like me to address, give me a call at 918 582-6131 -- I'd be glad to help! -- Ben Callicoat


Had a client call me the other day whom I'd spoken to previously. As always, I try to help people realize that bankruptcy is not the ONLY option they have -- but instead an emergency tool of last resort to be used in extreme situations only. Bankruptcy is the parachute you pull when the fourth engine of your financial airliner has caught fire and you're going down. And in fact I'd recommended that this particular client avoid filing a bankruptcy case -- not the least of reasons being that his social security benefits were the only source of income and therefore exempt from attachment or execution.

Let me to take half a step back here and explain.

Garnishment and Exempt Property

When you're being sued for indebtedness (because you are not paying some debt that is owed) the plaintiff's purpose is to get a judgment (a court decision and order) to force you to pay them. In order to collect on this judgment, the plaintiff will usually have to find some assets or property to attach. They do this by garnishment -- issuing a court order to someone holding property (such as a bank or an employer) also known as a "garnishee", for the judgment debtor. The court orders the garnishee to turn over the funds in that account to the judgment creditor / plaintiff.

However, among other defenses, each state has a set of exemptions -- laws that make certain property exempt from being taken from you to satisfy a debt. The law recognizes that some things are too basic, too important to being subject to seizure -- usually the basic necessities of life: food, shelter, clothing, for instance.

Oklahoma's excellent exemption statutes -- principally found at Oklahoma Statutes 31 O.S. sec. 1, and following, set forth all of the property interests that the Oklahoma legislature has decided a creditor should NOT be able to get in order to satisfy a judgment. For instance, under Oklahoma law your home and your home furniture are exempt. Also exempt is 75% of your income -- reason being, a person needs income lest they become wards of the state. (See OSCN link above.)

Beware "free" Legal Advice

So back to the story. The client having previously been advised (by yours truly) that his Social Security was safe from attachment, calls me one recent morning and says that his brother is a bank president. And that he, his brother, and another close friend -- by happenstance a retired attorney -- were talking about my advice, and the bank president told my client that I was wrong: his Social Security WAS in fact able to be garnished from his bank account, contrary to what I'd said. And to make matters worse, their mutual friend the retired attorney agreed with the bank president brother.

Whoa! Trouble in River City, Bankruptcy-Man! Had I given this man bad advice? Was I mistaken somehow? Are social security benefits exempt from being attached or not? All of these questions that were raging in someone's mind, if not my own.

Nonetheless, I knew that my previous advice was correct in spite of the fact that two people who should know disagreed with me. (One of them a lawyer!) But I stuck to my guns anyway. "They're wrong" I told the client flatly. "Your brother and the lawyer are just flat wrong." I repeated. "I will look up the exemption statute and call you back," I promised the client.

A quick check of Westlaw (Westlaw search terms "'social security' w/s exempt") pulled up the relevant Oklahoma case law. First case up was a March 2009 Oklahoma Court of Appeals case Ultra Thin, Inc. vs. Lane, 2009 WL 987387 (Okla.Civ.App. Div. 3).

Ultra Thin's fact pattern is substantially similar to my client's query: a judgment creditor had sought a garnishment against a debtor's bank account which had contained social security benefits held for his grandson. On the court's order, the garnishee bank had seized the contents of the account and forwarded them to the judgment creditor. The judgment debtor appealed this seizure on the grounds that the source of the funds was social security benefits which were exempt from attachment by reason of tit. 47 U.S. Code section 407, et seq.

Social Security Benefits Exempt from Garnishment

The Oklahoma Court of Appeals agreed. Social Security benefits are exempt under the federal law cited. In its opinion, the court specifically cites several federal court of appeals cases which held that not only were social security benefits from attachment or execution, they were even exempt after they had been commingled with other non-exempt funds. Case closed.

A quick call back to the client to confirm: "I was right; your brother and lawyer friend are wrong." "Social Security benefits are 100% exempt from attachment or garnishment." A creditor is prevented by federal law from seizing these funds to satisfy a judgment even when a court orders otherwise. Dead bang correct.

Moral of the Story: Don't try this at home

The law is complicated and it changes or evolves with each new opinion or court decision on a given topic. Lay people often mistakenly assume that the law is a simple "cut and dried" matter, when in fact it is not. If the law were that simple, lawsuits could be decided by computer programs. As it is, facts and context matter greatly.

Another lawyer I consulted later -- a creditor's lawyer who had spent years of litigating exactly these sorts of cases -- confided that he had long ago attempted to argue that once the funds were commingled with other non-exempt funds, that they lost their exemption. (He admitted that he had lost those arguments, even back then, however.)

Nonetheless it points out the dangers of relying on other people for your legal advice. Your brother in law who just passed the bar is probably not qualified to answer this relatively simple question unless he has just recently researched this precise question. Even a long-practicing attorney in another field is probably not qualified to say. Similarly, the retired attorney friend of my client in this real-life example, had either not looked at this issue recently, or never looked at this issue and was apparently shooting from the hip when he agreed with their banker friend. And if you're going to rely on non-lawyers -- even if it is your brother (maybe I should say "especially" if it is your brother) for legal advice, I don't know what to tell you -- that's just plain crazy.

It all goes to show, as the ever-wise late, great favorite son of Oklahoma Will Rogers once said, "It's not what folks don't know that's the problem. It's what they know that just ain't so."

Ah yes -- that's it exactly, Will.

Again, if you have a particular debt problem that you need some competent advice about, please call me at 918 582-6131 or send me an email: I'm all about helping people and would love to help you as well. fbc

Weasel Words Disclaimer

Disclaimer (a/k/a "Weasel Words"): This is NOT legal advice. This is a general interest blog post. If you haven't paid me a retainer, I'm not your lawyer. And come to think of it, if you are relying on a blog for legal advice without speaking to a lawyer, you are stupid. Or crazy. Or maybe both. You deserve every bad fate which will almost certainly befall you. In fact, please put this blog post down and back away slowly. Thank you.


  1. Great information Ben!


  2. Thanks for stopping by to read it, Emma!



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