Bank Account Garnishment in Kentucky: What Creditors Can and Cannot Take
If you owe a debt and a creditor obtains a judgment against you, one of the most aggressive collection tools available is bank account garnishment. A garnishment order directs your bank to freeze funds in your account and turn them over to the creditor. It can happen without warning, leaving you unable to pay rent, buy groceries, or cover basic expenses. But Kentucky law imposes limits on what creditors can take, and certain funds are protected from garnishment entirely.
How Bank Garnishment Works in Kentucky
After obtaining a judgment, the creditor files a garnishment action under KRS 425.501. The court issues a garnishment order directed to your bank (the “garnishee”). The bank is required to freeze the funds in your account up to the judgment amount and report to the court what funds are held. You receive notice of the garnishment and have an opportunity to claim exemptions before the funds are turned over to the creditor. The entire process can take as little as two to three weeks from the time the order is served on the bank.
Exempt Funds: What Creditors Cannot Take
Kentucky and federal law protect certain types of income from garnishment, even after the funds are deposited in a bank account:
Social Security benefits. Under federal law (42 U.S.C. § 407), Social Security benefits are exempt from garnishment by most creditors. If your bank account contains only Social Security deposits, the entire balance may be protected. Banks are required to review the account for direct-deposited federal benefits before freezing funds.
SSI and disability benefits. Supplemental Security Income and Social Security Disability Insurance payments are also federally protected from garnishment.
Veterans’ benefits. VA disability compensation, pension benefits, and educational benefits are exempt under 38 U.S.C. § 5301.
Retirement funds. Funds in qualified retirement accounts (401(k), IRA, pension plans) are generally exempt from garnishment under both federal (ERISA) and Kentucky law.
Workers’ compensation benefits. Under KRS 342.180, workers’ compensation benefits are exempt from garnishment.
Public assistance. Unemployment benefits, TANF, and other public assistance payments are generally exempt.
Commingling: The Tracing Problem
Exemptions get complicated when protected funds are mixed (“commingled”) with non-exempt funds in the same account. If your account contains $2,000 in Social Security deposits and $1,000 from a non-exempt source, you must trace which funds are exempt and prove it to the court. Keeping exempt funds in a separate account from other income makes this process far simpler. Federal regulations require banks to automatically protect two months of direct-deposited federal benefits, but this protection has limits and does not cover all exempt funds.
Claiming Your Exemptions
When you receive notice of a bank garnishment, you typically have a short window — often 10 to 20 days — to file a claim of exemption with the court. This claim must identify the exempt funds and provide supporting documentation (such as bank statements showing the source of deposits). If you miss this deadline, the funds may be released to the creditor even if they were exempt. Acting quickly is essential.
Wage Garnishment vs. Bank Garnishment
Bank garnishment is different from wage garnishment, though creditors often pursue both simultaneously. Wage garnishment under KRS 425.506 is limited to 25% of disposable earnings per pay period (or the amount by which weekly earnings exceed 30 times the federal minimum wage, whichever is less). These limits apply to wages before they hit your bank account. Once wages are deposited, they become general funds in the account and may lose the wage garnishment protections unless you can trace them.
If your bank account has been garnished or you are facing a judgment in Kentucky, contact Buckles Law Office at (859) 225-9540 to discuss your options for protecting your assets.
