The Wall Street Journal had an article this week about some federal legislators' attempts to get the U.S. Treasury Department to close the loophole that allows banks to seize consumers' Social Security and disability funds when they receive garnishment orders for a debt collection agency.

There is a federal law on the books that states that creditors cannot take Social Security, veteran's, disability and children's survivor benefits to pay a debt.  However, the law does not say how to protect these benefits that are directly deposited into bank accounts.

The impact of a frozen bank account can be financial hardship with no money for food and medicine as well as extra fees for bounced checks that were written and not yet cashed before the freeze.  Some banks even charge the consumer fees for freezing their account!

If any unpaid bills or bounced checks end up on the credit report, the impact on credit scores can be severe.  So while the Treasury Department and Congress work out the details, protect your benefits and your money.

SUGGESTIONS TO PROTECT YOURSELF
1. Check to see if your benefits are exempt from garnishment on this list from the Federal Trade Commission.

2. Don't mix Social Security and other exempt benefits with your other monies.  You may want to consider opening a bank account to be used ONLY for the direct deposit of your pension and benefits.

3. Avoid loans and credit cards from the bank where your SS and benefits are deposited.  This can eliminate the possible access to your account to pay other debts with the same financial institution.

4. If you are sued, go to court to make them prove the alleged debt.  The reason most people end up with a default judgment is because they do not take the time to defend themselves and request proper documentation from the collection agency trying to collect.

5. If your bank account is frozen, file an exemption claim within 10 days.  Contact your lawyer or legal aid in your community for further guidance and assistance.

6. Check your credit report every four months.  If you find a collection account listed, try to resolve it before it goes to court for a judgment, which appears as a public record on your credit file, a negative mark against your scores.

You have to be proactive on all fronts to grow your credit rating and get better credit scores.  And by reading this article, you're further ahead than most.  Your credit building efforts just might save you some money, too.