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
Thomas H. K~
Assistant Regional Counsel