Can A Debt Collector Seize My Disability Benefits? Connecticut Woman Settles SSDI Case

A credit union in Connecticut has settled a legal battle with a customer who sued it after it seized her Social Security Disability Insurance (SSDI) to repay a bad loan.

According to the Credit Union Times, the Wallingford Municipal Federal Credit Union located in Wallingford, Conn., seized Naomi Odell’s SSDI benefits after she defaulted on a secure loan from the bank. Odell was a former employee of the credit union and in 2005, her husband Nicholas defaulted on an $18,433 loan, suing him. Naomi allegedly co-signed on the loan.

Odell left the credit union in 2007 after she was diagnosed with multiple sclerosis, according to court documents. She reportedly lobbied for a part-time position, but could not secure one with the credit union due to her disabilities. A month later, Odell applied for SSDI benefits, which were approved the following year.

While applying for benefits, Odell provided the Social Security Administration (SSA) with her Wallingford Municipal Federal Credit Union account information for deposits, which was the only bank account she had at the time. After her SSDI application was approved, Odell was set to receive a lump sum payment of $13,801, due to back payments, which was to be made due to her waiting period.

Odell reportedly became concerned that the benefits were going to be deposited at the credit union, so she contacted its CEO/manager, asking him to return the funds to the SSA. She told the manager that the funds were exempt from debt collection and opened up an account at another bank. She claimed that she notified the manager that her home was in foreclosure and she needed the money so that she would not lose it.

On June 2, 2008, the credit union received the SSA payment. Odell closed the account that the payment was to go in, but she still had a shared account, which the funds were deposited in and seized.

Last August, a judge awarded Odell more than $200,000, noting that her benefits were exempt from debt collection. However, the credit union appealed the verdict, taking the case to an appellate court. Prior to the court taking up the case in the appellate court, a settlement was reached by both parties for an undisclosed sum.

Do I Need a Tulsa Disability Attorney?

Debt collection attempts involving federal benefits are a tricky subject. Federal laws dictate that benefit payments for disabilities are exempt from garnishment in debt collection. It should be noted that for some debts there are exceptions: some of these cases involve child support, spousal support and/or federal taxes.

Banks are required by law to protect at least two months of benefit payments that are electronically deposited into accounts through disability programs if a garnishment is requested. When a garnishment attempt occurs, the bank is required to review it and notify you. However, over the last few years, there have been garnishment cases involving people depositing benefits via check rather than direct deposit and making account transfers, where collectors have tried to seize funds.

You should always check your account balances if you receive SSDI or other federal benefits, to make sure your activities and funds are correct. You should also contact your bank if a garnishment has been made or one has been attempted, and you have questions.

Our firm is also able to answer your questions about applying for SSDI and SSI benefits, as well as help you throughout the appeals process. Contact a Tulsa Social Security disability attorney today for help. We offer free evaluations of your case, and you can reach us by phone at (918) 265-1404.

Troutman & Troutman, P.C. – Tulsa Social Security disability lawyers

Troutman Touts: SSDI recipients can have the SSA withhold a percentage of their benefits for tax purposes.



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