PR 07211.029 Montana

A. PR 03-172 Creditor Seizure Of SSI Benefits In Representative Payee's Bank Account - Gabrielle E. and Aaron B. M~

July 31, 2003

1. SYLLABUS

Section 207 of the Social Security Act prohibits attempts to direct the disposition of benefits certified to a representative payee. If a creditor attaches a beneficiary's account, for which a representative payee has only a fiduciary interest, the creditor's action violates section 207. A representative payee has no ownership interest in the benefits received on behalf of beneficiary and must use such benefits for the current needs of the beneficiary. Failure to do so constitutes misuse and is grounds for a change of representative payee. A representative payee can use section 207 as a defense against attachment by creditors.

2. OPINION

You have asked for our opinion as to whether a creditor has the right to seize Title XVI benefits from a bank account that only contains Title XVI funds that belong to two children Gabrielle E. M~, ~ and Aaron B. M~, ~. Their mother, Chris D. N~, is their representative payee; therefore, her name is on the account as their payee. A collection agency (creditor) is automatically withdrawing the benefits because Ms. N~ has a debt with them. A Justice of the Peace in Great Falls, Montana, ruled that the funds were not Social Security funds, but a personal loan to the mother because she was on the account as representative payee. For the reasons set forth below, we believe the creditor's action violates section 207 of the Act. We also believe the court erroneously considers the children's SSI benefits to be property of their mother.

Section 207(a) of the Act, 42 U.S.C. § 407, states that:

(a) The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

42 U.S.C. § 407(a). "This section is specifically incorporated into the statutory provisions pertaining to the SSI program by section 1631(d)(1) of the Act, 42 U.S.C. § 1383(d)(1)." Memorandum from Regional Chief Counsel, Philadelphia, to Regional Commissioner, Philadelphia, Pennsylvania Support Decree Assigning Social Security Payments - Rachel R. M~, SSN: ~ (March 25, 1994). "Section 207(a) applies not only to funds in the hands of SSA that have not yet been paid out, but also to funds that have been disbursed." Id. (citing 42 U.S.C. § 407(a) ("none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process . . . .")). Indeed, the protections of section 207 continue to apply to the proceeds of a social security benefit or supplemental security income payment that is held in a bank account, so long as the funds can be traced to the Federal payment. See Philpott v. Essex County Welfare Bd., 409 U.S. 413, 416-17 (1973); Dean v. Fred's Towing, et al., 245 Mont. 366, 371-372 (1990).

"Federal courts have generally interpreted section 207 broadly. Courts have upheld the bar of section 207 when attempts have been made to alienate social security benefits from both recipients and representative payees." Memorandum, Pennsylvania Support Decree, supra (citing Tidwell v. Schweiker, 677 F.2d 560, 566-68 (7th Cir. 1982) (holding that a consent form, which a state psychiatric facility asked those seeking hospitalization to sign authorizing the facility to reimburse itself for the cost of hospitalization from the social security benefits of the individual, violated section 207); Woodall v. Bartolino, 700 F. Supp. 210, 219-20 (S.D. N.Y. 1983) (holding that court orders may not properly be entered against social security benefits when they are managed by representative payees in order to enforce the application of the benefits to the care and maintenance of an institutionalized individual)).

"Federal courts have also enforced the protection of section 207 from post-judgment garnishment procedures that allowed the garnishment of bank accounts containing social security funds, where the procedures did not clearly distinguish these funds." Memorandum, Pennsylvania Support Decree, supra (citing Finberg v. Sullivan, 634 F.2d 50, 63 (3d Cir. 1980) (holding that bank accounts may not be attached without regard to whether they contain social security funds); Reigh v. Schleigh, 595 F. Supp. 1535, 1555 n.15 (D. Md. 1984) (holding that notice to debtors must inform them of the exemption of social security benefits from attachment); Deary v. Guardian Loan Co., Inc., 534 F. Supp. 1178, 1187-88 (S.D. N.Y. 1982) (holding that judgment debtors were entitled to notice of both the exemptions to which they may be entitled and the procedures for assessing those exemptions).

The cases cited above "demonstrate how clearly and carefully courts have followed the language of section 207. As section 207 sets forth, 'none of the moneys paid . . . shall be subject to legal process.'" Memorandum, Pennsylvania Support Decree, supra (quoting 42 U.S.C. § 407). Thus, we believe the creditor's seizure of the children's SSI benefits constitutes an attachment that violates section 207.

Moreover, Gabrielle and Aaron, the two children, are the individuals that SSA had found eligible for SSI payments, not Ms. N~, their mother. See Memorandum, Pennsylvania Support Decree, supra (citing 42 U.S.C. § 1382 (for definition of eligible individual)). Because the children are the individuals eligible for SSI payments, those payments are their property, not their mother's, who is simply their representative payee. See id. Representative payees have no ownership interest in the SSI payments. They must use the payments for the use and benefit of the eligible individual. See 42 U.S.C. § 1383(a)(2)(ii)(I). Failure to do so constitutes misuse and is grounds for a change of representative payee. See 20 C.F.R. § 416.650(a); POMS GN 00604.001. "Although we have found no [Montana] cases precisely on point, we have found authority in other jurisdictions that support this proposition." See Memorandum, Pennsylvania Support Decree, supra (citing Miller v. Shapiro, 225 A.2d 644, 646 (Conn. Cir. Ct. 1966) (holding that child's insurance benefits are the child's property and not the parent's or the representative payee's)). Because the children's SSI benefits are not their mother's property, they may not be seized to discharge Ms. N~'s debt. See id.

In conclusion, "section 207 is intended to protect social security benefits from all attempts to use legal process to alienate them, unless Congress has specifically indicated otherwise." Memorandum, Pennsylvania Support Decree, supra. However, if any court action is to be taken at this time, Ms. N~ should take it, through her attorney. If Ms. N~ does not take action to stop the seizure of her children's benefits, SSA should appoint a new representative payee for Gabrielle and Aaron. Then the creditor will not have access to the children's funds.

Yvette G. K~
Acting Regional Chief Counsel, Region VII

By ______________
Thomas H. K~
Assistant Regional Counsel

B. PR 03-155 Court Order Directing Use of Monthly Social Security Benefits - John A. H~(Revised)_11

DATE: July 15, 2003

1. SYLLABUS

Under section 207 of the Social Security Act, social security benefits and the associated rights under the SS Act are generally neither assignable nor subject to legal process. Section 207 prohibits attempts to direct the disposition of benefits certified to a representative payee. SSA does not get involved in section 207 issues that occur after payment to a beneficiary has been completed. If a court order directs a payee how to use an individual's benefits, the payee can use sectin 207 as a defense against such action.

2. OPINION

Your office has requested our assistance in reviewing a court order, issued by the Montana Thirteenth Judicial District Court, Carbon County, to determine whether the order is contrary to Social Security Administration (SSA) regulations and policy. The court order directs the guardian/conservator and representative payee, Tracy J. R~, to deposit the future Social Security benefits of John A. H~ (John), a minor child, in a restricted guardian/conservator account at Edward J., an investment company in Red Lodge, Montana. The court order further provides that Ms. R~ shall be paid a monthly stipend of $548 from the restricted account for John's care and support, i.e., current maintenance. You have informed us that John's monthly Social Security benefits amount is $1095. For the reasons set forth below, we believe the court order violates section 207(a) of the Social Security Act (Act), 42 U.S.C. § 407(a).

Section 207(a) of the Act states:

The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

42 U.S.C. § 407(a). See also POMS GN 02410.001. "Under the Act, therefore, Social Security benefits and the associated rights under the Social Security Act are generally neither assignable nor subject to legal process. Indeed, section 207's broad bar against the use of any legal process to reach Social Security benefits includes not only all claimants or creditors, but also states." Memorandum from Regional Chief Counsel, Philadelphia, to Regional Commissioner, Philadelphia, Pennsylvania Support Decree Assigning Social Security Payments - Rachel R. M~, SSN: ~ (March 25, 1994) (citing Philpott v. Essex County Welfare Bd., 409 U.S. 413, 416-17 (1973).

"Federal courts have generally interpreted section 207 broadly. Courts have upheld the bar of section 207 when attempts have been made to alienate Social Security benefits from both recipients and representative payees." Id. (citing Tidwell v. Schweiker, 677 F.2d 560, 566-68 (7th Cir. 1982) (holding that a consent form, which a state psychiatric facility asked those seeking hospitalization to sign authorizing the facility to reimburse itself for the cost of hospitalization from the Social Security benefits of the individual, violated section 207); Woodall v. Bartolino, 700 F. Supp. 210, 219-20 (S.D. N.Y. 1983) (holding that court orders may not properly be entered against Social Security benefits when they are managed by representative payees in order to enforce the application of the benefits to the care and maintenance of an institutionalized individual).

"Furthermore, it is well-established that the Federal Government, as sovereign, is immune from suits in and the orders of state courts, unless the sovereign has consented to submit itself to the jurisdiction of such court, which in the present case, it has not." Memorandum from Regional Chief Counsel, Chicago, to Manager, Cleveland Downtown Field Office, Charles C~, SSN ~, Advice About State Court Order to Appoint Representative Payee (October 4, 2002) (citing United States v. Sherwood, 312 U.S. 584 (1941)).

Moreover, if Ms. R~ "complies with the court's order, she may violate her responsibilities as a representative payee." Memorandum, Pennsylvania Support Decree, supra (citing 42 U.S.C. § 1383(a)(2)). "Under the regulations, a representative payee has the responsibility to ensure [that Social Security] benefits are used only for the use and benefit of the beneficiary in the manner she determines to be in the best interests of the beneficiary." Id. (citing § 416.635); see also 20 C.F.R. § 404.2035. "In this case, it could be said that by complying with the court order, [Ms. R~] has allowed her rights and responsibilities as a representative payee to be usurped: she is not making the decisions about the use of the funds, but has turned them over to [the court and to Edward J.] in accordance with the court order." Id.

In sum, section 207 of the Act is intended to protect the rights and benefits arising under the Act "from all attempts to use legal process to alienate them, unless Congress has specifically indicated otherwise." Id. We believe the court's order, which can be construed as assigning control of John's Social Security benefits to another, is violative of section 207 because it constitutes legal process that seeks to affect rights arising under the Act. "Identifiable Social Security benefits cannot be taken by judicial order, and in this case it appears that they have been." Id. (citing Woodall, 700 F. Supp. at 221). Moreover, in the state court process used here, the state court has taken upon itself the authority to decide who shall manage the child's Social Security benefits, and how they shall be managed. However, Congress has granted the power to make that selection exclusively to the Commissioner in section 205(j) of the Act, and the Commissioner's regulations and decisions issued thereunder are clearly to be given deference. See Washington Department of Social and Health Services v. Guardianship Estate of Danny Keffeler, 123 S.Ct. 1017 (2003). Because the state court's actions are contrary to the controlling Federal statute and the decision of the Commissioner issued thereunder, the state court's attempt to assume such authority must fail under the Supremacy Clause of the United States Constitution._22

As a matter of litigation policy, SSA does not get involved in section 207 issues that arise after payment to the beneficiary has been completed. Therefore, if any court action is to be taken at this time, Ms. R~, the person subject to the court's order, through her attorney, should take it.

Yvette G. K~
Acting Regional Chief Counsel, Region VII

By ______________
Thomas H. K~
Assistant Regional Counsel

_11 On November 5, 2002, we issued an opinion stating the court order did not contravene SSA regulations.

_22 "The Supremacy Clause of the Constitution, Article VI, cl. 2, states that the 'Constitution, and the laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land, and the Judges in every State shall be bound thereby, anything in the Constitution of Laws of any State to the Contrary notwithstanding.' The Supreme Court has recognized it 'is a seminal principle of our law that the constitution and the laws made in pursuance thereof are supreme; that they control the constitution and laws of the respective States and cannot be controlled by them.'" Memorandum from OGC Policy and Legislation Division, to Office of Disability Division of Medical and Vocational Policy, Issues Related to Disability Examiners Ordering Consultative Examinations and Tests and Medical and Psychological Consultants Developing Cases for Disability Determination Services (DDS) in Other States (August 21, 1998) (citing Hancock v. Train, 426 U.S. 167, 178 (1976) (internal quotation marks omitted).


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PR 07211.029 - Montana - 03/25/2004
Batch run: 04/25/2016
Rev:03/25/2004