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#968378 - 06/03/08 06:05 PM Social Security Benefits as Loan Collateral
Ms Auditor Offline
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Upstate NY
Can a customer pledge their social security benefits to secure a loan? This assumes that the bank has already received the social security benefits and would place the money into a CD.

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General Discussion
#968460 - 06/03/08 06:52 PM Re: Social Security Benefits as Loan Collateral Ms Auditor
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
I'm not sure of your question. However if I receive SS benefits and I take my monthly benefits from my DDA and place them into a CD I am free to do as I choose with that CD, including pledging it as collateral for a loan.
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#968622 - 06/03/08 08:48 PM Re: Social Security Benefits as Loan Collateral Dan Persfull
Ms Auditor Offline
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Thanks - that's what I was looking for.

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#969170 - 06/04/08 03:42 PM Re: Social Security Benefits as Loan Collateral Ms Auditor
Mint Julep Offline
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I wouldn't call that a pledge of SS benefits. I'd call that a pledge of a deposit account. I doubt you could contract the government to pay you the SS benefit in the event of default.

SS benefit is personal income, which is usually the source of repayment, also.
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#969255 - 06/04/08 04:51 PM Re: Social Security Benefits as Loan Collateral Mint Julep
Parrot Mama Offline
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I would say "no" on any type of pledge for social security benefits. In fact, there are regulations that prohibit the bank from debiting a customer's account for a past due payment if the source of income was from a goverment benefit. I would check the rules since I am only vaguely remembering them.

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#969297 - 06/04/08 05:29 PM Re: Social Security Benefits as Loan Collateral Parrot Mama
Ms Auditor Offline
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Parrot Mama - This is the issue I'm having. We have a customer thats received say $5,000 in social security benefits. This money is sitting in a savings account. Now we wants to borrow $ and put the money from the savings account into a CD to secure the loan. If we need to collect on the loan would we be able to liquidate the CD? I'm looking for some references that might address this issue one way or another.

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#969312 - 06/04/08 05:38 PM Re: Social Security Benefits as Loan Collateral Ms Auditor
rlcarey Online
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rlcarey
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Galveston, TX
Once the SS benefits are received, the recipient can do anything that they want with the funds. The fact that the CD was derived from SS benefit money has no bearing on whether you can take the CD as collateral for a loan.
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#969673 - 06/05/08 10:29 AM Re: Social Security Benefits as Loan Collateral Parrot Mama
Richard Insley Offline
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Richard Insley
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Toano, VA
Originally Posted By: Parrot Mama
In fact, there are regulations that prohibit the bank from debiting a customer's account for a past due payment if the source of income was from a goverment benefit.

Can you provide the cite so we can take a closer look? Although IRA funds can't be used as loan collateral, I don't remember any "strings" tied to payouts of retirement benefits.
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#969996 - 06/05/08 05:14 PM Re: Social Security Benefits as Loan Collateral Ms Auditor
Elwood P. Dowd Offline
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Elwood P. Dowd
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Next to Harvey
No.

Quote:
42 USC Sec. 407. Assignment of benefits


(a) In general

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.


Well, maybe the customer could sign a pledge, but you could not enforce it.

As noted, if SSA funds are co-mingled with other funds as in a DDA, "tracing" is a possibility if you were attempting to exercise a right of offset.

However, as has also already been noted, the fact that the time deposit was previously purchased with SSA payments would be no more relevant than the fact that a car used as collateral was purchased with SSA payments.
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