Certain Government Benefits Off Limits to Creditors in Arizona
Creditors may turn to garnishment to collect debts owed. However, some assets and sources of income, like government benefits, are exempt from wage garnishment in Arizona and under federal law.

November 17, 2011 /24-7PressRelease/ -- When you owe money to a credit card company, mortgage provider, auto loan company or some other creditor, after obtaining a judgment, they may turn to garnishment to collect on your debt. A garnishment action allows a creditor to collect the money they are owed directly from a third party, like your employer or bank.

However, some assets and sources of income are exempt from wage garnishment in Arizona and under federal law. Perhaps the most notable exemption is a wide range of government benefits.

Social Security Among Benefits Exempt From Garnishments

So just what kinds of benefits are exempt from garnishment? At a minimum, all states have to honor federal exemptions for Social Security benefits. Social Security payments can only be garnished for a very limited subset of obligations, such as debts owed to the federal government, child support and alimony. Supplemental Security Income is also exempt from garnishment in all states.

States may also establish their own garnishment exemptions. In, Arizona, several additional types of government benefits are protected. Veterans administration benefits, workers' compensation proceeds, Temporary Assistance for Needy Families and unemployment benefits are all exempt from garnishment. In addition, certain pension or retirement funds are exempt, such as local government plans for police officers and firefighters and state employee pensions.

New Mechanism for Separating Exempt and Nonexempt Funds

Previously, when exempt benefits were comingled with nonexempt funds (such as when Social Security payments were deposited into an account that also contained personal savings), banks that received a garnishment order would have to freeze your whole account until you could defend which funds were exempt from garnishment. As of mid 2011, however, new federal regulations require banks to track electronic deposits from federal benefit payments. That way, banks can quickly determine which of your funds are exempt upon receiving a garnishment order.

Call a Bankruptcy Attorney about Your Garnishment Concerns

Although government benefits are the broadest category of garnishment exemptions, there are a number of additional types of income and assets that may also be exempt. If you are facing garnishment, contacting an Arizona bankruptcy lawyer to help determine how you can protect your property is advised.

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