Two New Rules For Direct Deposit Of Social Security And SSI Benefits

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Wabanaki Legal News, Spring 2011

Starting May 1, 2011 new applicants for Social Security and SSI (and some other federal programs) are required to have their benefits deposited directly to a bank account or Direct Express card account. The option of paper checks will no longer be available unless a special hardship waiver is granted. It will be very difficult to prove hardship under the new rules. People who have been getting their Social Security and SSI benefits by check will need to switch to electronic payments by March 1, 2013 unless they obtain a waiver.

Although Social Security and SSI benefits are supposed to be exempt from debt collection, many creditors are still able to get banks to freeze bank accounts containing the federal benefits. Starting May 1, 2011, there will be new protection against debt collectors who are trying to collect debts from electronically deposited benefits. The new rule will require banks that receive a garnishment order to leave unfrozen the last two months of the protected federal benefits, or the full balance in the account if it is less than two months of benefits. The purpose of the new rule is to make sure that people who receive federal benefits will have unrestricted access to funds they need for their living expenses.

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