MADELEINE BRAND, host:
New numbers are out on consumer spending, and it looks like people spent more last month because of those economic stimulus checks, but that spending spree may have been just that, a spree.
ALEX CHADWICK, host:
Credit is tight. Credit card debt is high. And if you get into trouble, creditors may try to get you to pay up by taking you to court. But the Social Security Administration's Office of the Inspector General says some court ordered solutions are very questionable. Michelle Singletary's here with us. She's Day to Day's personal finance contributor. Michelle, how are Social Security payments protected from collectors?
MICHELLE SINGLETARY: Well, you know, a lot of people don't realize this, but there are federal rules that prohibit garnishing accounts that receive electronic deposits of Social Security benefits, supplemental security income payments, disability insurance. So these funds are supposed to be protected from creditors, except under some certain conditions, because the thought is that, if people are receiving these payments, which are minimum at best for many people, that you don't want to have creditors attaching funds that people use to buy groceries or to pay their rent.
Certainly, people ought to pay their bills, but you have to leave them with some money to live. So that's why these funds are protected. But in this economy, as more people struggle and put off paying their bills so they can buy food, creditors are taking them to court, and banks are freezing these accounts and taking money out against the federal rules. And people are left - you know, it's interesting, not a lot of people know about these rules.
CHADWICK: Are there conditions under which they can garnish your Social Security money?
SINGLETARY: Well, there are, and they're very limited, to collect child support and/or alimony payments, to collect unpaid federal taxes as a result of an IRS levy. If the government beneficiary elects to have a percentage of their benefits taken out to satisfy a tax debt, or a federal agency needs to collect some money.
So very limited under those conditions. But say, if it's for a credit card bill or car loan or would not fit under these rules, and if it is those kind of benefits or a Social Security benefit check or disability, those payments cannot be garnished by these rules.
CHADWICK: What if you are in a situation where that's the money you've got, Social Security, and it is being garnished because, as you say, people don't know about these rules. What do you do?
SINGLETARY: That's right. And, you know, I have to give credit to three Democratic senators that looked into this because they were concerned about this widespread practice of improperly deducting fees and money from these direct deposit accounts.
So what should you do? The Social Security Administration recommends that, if your benefits have been taken from your bank account, and they are protected, that you need to let the creditor know, and you need to let the bank know because one reader did that.
Her mother saw the column, sent it to her daughter in New York, and she took it to the credit union and said you cannot take these funds. They had frozen her accounts. And they unfroze it, to their credit, because they then realized that they weren't supposed to do that. So you need to complain, and in some cases, you may unfortunately have to get some legal help to get your money unfrozen.
CHADWICK: Michelle Singletary, Day to Day's personal finance contributor. Her column "The Color of Money" is syndicated by the Washington Post. Michelle, always good advice. Thank you.
SINGLETARY: You're welcome.
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