Imagine this scenario: An Ohio worker suffers a debilitating injury at work. After a long journey through the government's red tape, the worker finally receives the Social Security Disability insurance he needs.
Medical bills pile up, and the worker struggles to make ends meet on his limited income. The credit card companies begin harassing the man, and they eventually freeze his accounts and garnish his wages.
Thankfully, a new law went into effect at the beginning of May, which prevents the federal payments injured workers receive from being garnished.
Under the new law, a variety of federal payments - including Social Security benefits, Supplemental Security Income benefits and veterans' benefits - cannot be withheld from their recipient and doled out to creditors.
Prior to the new law, some of the "nation's most debt-ridden and impoverished people" were left without any finances. In many situations, individuals whose federal benefits were garnished were left without access to necessities such as food, shelter or health care.
According to an article in Fox Business, more than 1 million individuals have federal payments improperly frozen because of wage garnishment each year. An attorney with the National Consumer Law Center said, "All too often, elders, veterans and disability benefit recipients who rely on these benefits for their basic needs have been unable to access them for extended periods because of creditor-imposed garnishment freezes."
Surprisingly, even the banks approve of the new laws. One spokesperson for the trade group that represents most of the nation's banks said that the procedures banks had to follow previously put many individuals in severe hardships.
Before the new law was implemented, there was already a similar restriction in place. However, many banks felt as though they were caught in a tug-of-war - getting pulled between creditors who had court orders entitling them to payment and debtors who expected to have access to funds that are allegedly protected. Hopefully the new laws will help encourage banks and creditors to better respect the funds that belong to injured workers.
Source: Fox Business, "New Rule Protects Exempted Funds from Garnishment Orders," Martin Merzer, 6 May 2011