When pursuing debt collection in Florida, it is important to know which assets and income cannot be garnished. Federal and state laws generally protect Social Security benefits and some retirement funds, which can make it harder to collect on a judgment. Understanding how these exemptions work is key to avoiding costly mistakes while guiding better ways to enforce the judgment.
Social Security exemption
Social Security benefits are generally exempt from garnishment by commercial creditors, providing important protection for recipients. While this protection also applies to bank accounts, the steps can be more complicated. Under the federal look-back rule, when a bank gets a garnishment order, it must automatically shield up to two months of Social Security benefits deposited into the account.
Problems can come up when Social Security money mixes with other deposits, like wages or retirement payments. In those cases, courts may have to track the protected money to figure out how much of the account remains protected.
State protections around retirement funds
Florida law strongly protects retirement funds and generally keeps the following safe from most creditor claims:
- ERISA-qualified plans
- 401(k)s
- Individual Retirement Accounts (IRAs)
Often, creditors still cannot claim these funds after payout, as long as the money can be clearly identified and tracked as retirement funds.
However, this protection is not absolute. Inherited IRAs generally do not receive the same exempt status, consistent with the U.S. Supreme Court’s decision in Clark v. Rameker. These safeguards may also not apply to some family court orders, such as alimony or child support.
The risks of pursuing exempt income
If you head a collections department, it is often wise to do a cost-benefit review before filing for a writ of garnishment. Running an asset search or questioning the debtor can show where their money comes from and whether it has exemptions. This can lower the risk of garnishing the wrong funds.
If you knowingly go after exempt funds, you could be responsible for costs or attorney’s fees. In some cases, such as when the debtor’s only income is Social Security, they may not have reachable assets. This can make aggressive collection unrealistic. In those cases, it may be better to focus on a settlement instead of continuing expensive litigation.
Exploring other collection options
While Social Security and retirement funds are difficult to reach, you may still collect from other avenues if they are available. An experienced legal professional can help you review your current strategy for recovering the judgment.
