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ANSWER: While you are correct that the SS funds are exempt, State law governs to what extent the exemption prevails. For example, in NY the first $2,500 in an account that has had statutorily exempt payments deposited either electronically or by direct deposit in the last 45 days before a restraining notice was served on the bank is protected. If there is $2,500 or less in the account, the account cannot be restrained and the restraining notice is void. If there is more than $2,500 in the account, only the balance above $2,500 can be restrained. Usually the bank has to notify you of the garnishment and it is at that time you have to claim that all of those funds are from SS and thus exempt. If there is a still a dispute, then a hearing is held and the court decides what portion of the account is exempt. In your case it appears that you did not receive any notice and the bank released the funds without your having a chance to claim an exemption. You may have a negligence claim against the bank depending on your State's law.
No. I have never seen any law make that type of a distinction in this context. The problem typically is not what TYPE of account the SS funds are in; rather the problem is commingling those funds with non-SS funds and then one side tries to claim that they are all from SS and the other that they are not, either in part or whole.