This can be a good thing because the U.S. government expects to save money (about $1 billion over the next 10 years) with the move. But if you are a beneficiary that owes money to creditors you may have to do a little work to avoid co-mingling your monies and letting your Social Security benefits lose their protected status according to an article by an Atlanta Bankruptcy Attorney, Jonathon Ginsberg.
Federal law prohibits creditors from taking Social Security, disability, veterans’ and children’s survivor benefits. But money deposited directly into bank accounts can be put into jeopardy when banks receive garnishment orders from debt collectors. Frozen accounts can then amass overdraft fees from the bank. For one-quarter of elder beneficiaries, Social Security is the sole source of retirement income according the Social Security Administration. In the past, the ability of creditors to garnish co-mingled funds has resulted in individuals abandoning electronic deposits, an option that no longer exists.
Social Security money that is co-mingled with non-Social Security money such as gifts of money can jeopardize the special protection offered to Social Security money. The easiest solution for Social Security recipients is to check with your bank to see if they offer the ability to create a sub-account that only holds SSA issued funds. By working with your bank now to protect those funds, you’ll avoid the financial and emotional toll of trying to re-capture those funds later on.