Protected Funds Not Off Limits To Seizure

Tactics Prey On Those Who Have Money Exempt From Debt Collection

(CBS)  Janet Yuhasz was injured two years ago, and now lives check-to-check on government disability.

“I started having difficulty keeping up with my bills,” she tells CBS News correspondent Randall Pinkston.

Debt collectors went after her, sending her bank a court order to freeze her account. She couldn't buy groceries and the bank charged her $150 a processing fee to freeze the account.

“When they placed a lien on your account, what did you think?” Pinkston asked.

“Well, first I got very angry, because I didn't know it was allowed to be done,” she said.

It turns out, in her case, it was not allowed. Social Security, welfare, disability and veteran's benefits are all exempt from debt collection.

“Those funds are considered exempt, because they belong to people who are fragile, who have a disability that prevents them from working,” says Tanya Douglas, Yuhasz’s lawyer.

Yuhasz eventually got the money back.

“But they did keep their legal fee of $150, I believe it was,” she said.

Consumer lawyers and advocates point to thousands of cases like Yuhasz's, where protected money is being seized electronically -- leaving the poor and the elderly with depleted accounts, bank fees, and bounced checks.

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Pinkston Blogs: Frozen Assets: Holes In The Safety Net

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Here's how it can happen. Debt collection firms send banks restraining orders for tens of thousands of delinquent debtors. The bank searches for any matching names in their database, and if they get a match, the account is frozen.

If deposits in the account are exempt from debt collection, it's up to the consumer to sort it out and the bank faces no penalty.

Nessa Feddis of the American Bankers Association says banks are caught in the middle.

“They have to obey a court order, there's no choice there, and they somehow have to determine which dollar came from which deposit,” she said.

But some banks do check an account's history to determine if funds are subject to seizure, or exempt, like Social Security.

Legal services lawyer Johnson Tyler says if one bank can do it, they all can.

“They have computer systems that are very sophisticated, and the idea that they can't figure out if an account contains Social Security, only Social Security, is preposterous,” Tyler said.

If your exempt account is frozen, consumer advocates say the best thing to do is contact your bank and find a lawyer.

[auntienan]

The idea that debt collectors can obtain court orders to freeze ANYONES bank accounts is downright scary. The potiential for abuse is outragious... I have an ex-husband from 20 years ago who doesn''t pay his bills. I''ve had to use my divorce papers to prove to bill collectors that I am not responsible for his debts when they come trying to collect off of me. I surely hope the account holder has an opportunity to address the courts BEFORE such freeze orders are issued. There should be a law about that... and that would eliminate the problem as the debtor can inform the court where their funds originate.

[r_fenlason]

My name is Ron Fenlason. I served in the U.S Air Forse during the Viet Nam coflict. I was stationed at a small detatchment in Italy for a year. While I was there, I had severe headaches the DR didn''t have a regular office, he would treat you where-ever you happened to be. My headaches were so severe and so often that he would just walk up to me and know that my head was hurting. He would give me a darvon and some other small capsule that was black and tourquoise. He would tell me to take them with a rum & coke.
The headaches followed me for years.
On Oct. 26, 1996 I collapsed and was sent to the hospital. Eventually they found that I had a brain aneurysm that had burst. I had a grand mal seizure, which promted them to do a cat-scan. I was sent to a larger hospital and underwent brain surgery to clip the aneurysm. Then I had another surgery to insert a shunt to drain excess fluid.
I "died" three times in the first few days. Thank God they were able to bring me back.
I am being treated at my local VA hospital in Augusta, Maine. I am on ten different Prescriptions, each has a co-pay of $8.00 for a 30 day supply. It seems that Medicare can''t pay, government money can''t pay a governmet debt. Although, for the last two months the VA accounting office has tapped my Social Security check.( I thought S/S was government money?). I still suffer from deficeipts. Stress hits me easily & often.
What can I do? Sincerly Ron Fenlason.

[lewiston14]

NJCOFFMAN: Im going to have to disagree with your Comment. Things can and do happen. How about if your in a car today and crash loosing the ability to do most anything. (Don%u2019t say it can%u2019t happen) How would you then feel if they froze your account? A lower tier of cable TV is something less then $20. Perhaps the only thing these people will have to look forward to. In most cases the people it happens to did not ask for it to happen. It just does. I found your comment very selfish. The most likely reason is you never had to go through what they do everyday. Yes a few cheat. Go after them. That person in the video could be your mother, again how would you feel then. Would you change your mind? Maybe if stopped spending a trillion on another subject out of this country maybe thing would not be so bad.

[whispyseas]

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[njcoffman]

Now come on, the truth needs to be told. As a landlord, I have the opportunity to pull several credit reports to screen potential tenants. There are tons of people who are on government aid in one form or another and have tons of collection accounts for luxuries such as cable tv, expensive water services, credit cards and etc. They bank on the fact that they can not be collected upon and take advantage by not paying their bills. We pay for them to be on the government teat and we pay for them when they don''t pay their bills. They should be able to be collected upon just like anyone else, further, if they have all of these collection accounts for luxuries and not necessities, then they should be removed from the government program. They are just a drain to society.

[yfservant]

Although the general gist of this story is correct, and the victims portrayed authentic, you%u2019ve painted with too broad a brush and given some information that is in error. First, calling the money %u201CSocial Security%u201D is too general, as there are many different funds that come from the SSA (Social Security Administration). %u201CSSA%u201D is earnings-based money for those of retirement age, %u201COASDI%u201D is mainly disability money for people partly or fully qualified through earnings, but too young to retire or not fully funded (less than forty earnings quarters) and SSI is for those without qualified earnings, including the young and those who have never earned. Different types are treated differently. I work in child support enforcement, and we regularly and legally, with the express assistance of the federal government, seize lump sums and attach periodic disbursements of %u201CSocial Security%u201D for the purpose of collecting past due child support from non-custodial parents. Your advice that anyone who%u2019s had such a collection done should hire a lawyer is true for many individuals: SSI in particular is generally exempt from any collection (including ours) as it is considered a %u201Cmeans-tested%u201D program that keeps people out of poverty. I%u2019m not saying this is a good or a bad thing. I%u2019m just suggesting you dig deeper with the federal Office of Child Support Enforcement and do a correction as appropriate.