Q: If a car is returned to the bank, can they take social security money in a checking account?

A: Social security benefits are generally exempt under most if not all state laws, so general creditors cannot use the court systems to capture your benefits.

Most banks are federally chartered, or are insured by the FDIC, and because of that, tend to comply with federal law and requirements.

That said, as a general rule, financial institutions have both an equitable right, and often an express right, to offset any amounts currently on deposit with that bank against any debt owed to that bank, whether a car loan, home loan, credit card or personal loan (Visa, and perhaps some other credit cards, have limits contained in their agreements with the financial institution which may limit that right of offset).

To be safe, never keep your deposit accounts in a financial institution that is also your lender/creditor (so you can avoid that offset right).

If you don't wish to move your deposit account(s), deliver a LETTER to your financial institution making it clear that your deposit account contains only SS benefits/deposits, and none other, and that SS benefits are exempt from attachment and offset.

There is often a difference between what a bank/creditor does, and what the law permits or regulates.

A: If you return a car to the bank and still owe money on it, the bank may try to recover the remaining debt. However, Social Security funds generally have protections against most types of garnishment.

Under federal law, Social Security benefits are protected from garnishment for most debts. This includes debts like auto loans. When these benefits are deposited into a bank account, they retain these protections. However, it's important that the bank account only contains Social Security funds. If the account has other funds mixed in, it could complicate the situation.

If the bank attempts to freeze or garnish the account containing only your Social Security benefits, you should notify them immediately that these funds are from Social Security. In many cases, this will stop the garnishment process.

If you encounter difficulties with the bank regarding this matter, it may be beneficial to seek legal advice or contact your local legal aid organization for assistance. They can help you understand your rights and guide you through the process of protecting your Social Security funds.