Can Creditors Attach Pension Money?

When debtors owe money, creditors use different tactics in an attempt to obtain money owed. One of these tactics is garnishment. Garnishment allows a creditor to have money taken out of bank accounts or from an employee's salary before the employer pays the employee. However, garnishment takes place only after a judge orders the garnishment. In addition, certain types of accounts are exempt from garnishment.

Creditor Garnishment

Creditors may threaten to attach a garnishment to a pension account, but the law prevents garnishments from taking place without creditors first going before a judge to obtain a garnishment judgment. Creditors threatening to impose garnishment before receiving a garnishment judgment do so without any legal authority. Only a court order can impose a garnishment attachment.

Receipt

If a creditor tries to attach a garnishment to pension money, the creditor cannot touch the money before the pensioner receives the money. It cannot collect the money directly from the pension fund. However, once the money is in a bank account, the creditor can furnish banking authorities with the garnishment order. The authorities will then turn over the money to the creditor, after the bank verifies the authenticity of the court order.

Child Support

Although pension money can be garnished, some creditors cannot access pension funds. In most cases, credit card companies cannot have a judge issue a garnishment of pension funds. However, if back child support is owed, a judge can attach a garnishment to the pension money.

Social Security

In addition to pension money, Social Security benefits are protected from having garnishments attached. The only exception to this is the federal government. If a person owes money to the federal government, both Social Security benefits --- and pension money, in some cases --- are subject to having garnishments attached.

Frozen Accounts

In some cases, an account will be frozen while a creditor attempts to have a garnishment attached to the account. While the creditor goes to court for the garnishment attachment, the bank account remains frozen. To keep the pension money in the account from being frozen --- and by extension, inaccessible --- a pensioner might remove the money prior to the garnishment order, thereby protecting his pension assets.

Bankruptcy

Under the federal bankruptcy rules, an individual filing for bankruptcy will have collection tactics stop. The court orders an "automatic stay," while the bankruptcy proceeds. Automatic stays prevent creditors from attempting to collect on debt, including calling the debtor and/or seeking garnishment judgments. Because bankruptcy is governed by federal law, bankruptcy procedures apply uniformly in every state.

References

• MichiganLegalAid.org: Facts about Garnishment - Michigan Legal Aid
• Bills.com; Can My Pension Benefits Be Garnished by the Mortgage Company; July 2011
• Social Security Online; Garnishing Social Security Benefits Due to a Debt; July 2011
• The University of Arizona: Bankruptcy Law Research Guide - Garnishment
• Iowa Department of Justice: Debt Collection
• United States Courts; Federal Rules of Bankruptcy Procedure; December 2010