What Pensions Are Exempt From Garnishment?
If you default on a loan, your creditor can garnish your income--that is, take money you owe directly from your paychecks or bank account. If you are retired and living on a government pension or Social Security retirement check, don't worry. Creditors cannot legally garnish these payments. Private pensions may be subject to garnishment depending on state laws. In addition to consulting an attorney, if you owe money, you should talk to your bank to protect yourself from garnishment.
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State Pensions
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State pensions, such as pensions for former firefighters or teachers, cannot be garnished in most states. Whether private pensions can be garnished depends on state law.
Social Security Retirement Funds
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All Social Security payments, including retirement payments, are exempt from garnishment. Disability payments are exempt even if you have not reached retirement age yet.
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How to Protect Exempt Funds from Garnishment
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You should have a separate bank account for your exempt pension funds, because if they are placed in the same account as nonexempt sources of income, the bank may not realize you have pension funds in the account and honor a garnishment request. In addition to opening a separate account for these funds, you should also inform the bank these funds are exempt from garnishment. If a creditor garnishes exempt funds, you can go to court and file a notice of exemption. If the court affirms your funds were exempt from garnishment, the creditor must return them to you.
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References
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