State Exemptions on Deposit Accounts: Automatic and Claimed Protections Banks Must Apply

Most bank account garnishment exemptions belong to the customer. The customer has to know about them, fill out a form, and convince a creditor or a court. A smaller set of exemptions belong to the bank's procedure: the bank must apply them on its own, before freezing anything, whether or not the customer ever asks. Legal-order processors have to know which is which, state by state, because getting it wrong means either freezing money the law says the bank should never have touched or releasing money the order lawfully reached.

This post explains the difference between automatic and claimed exemptions, walks through three states whose automatic deposit-account protections we verified on official sources, covers the exempt sources customers most often claim, shows how state protections layer on top of the federal protected amount under 31 CFR Part 212, and ends with a process for keeping your exemption tables current. For the full order-handling workflow, see our overview of bank account garnishments.

A word on the search phrase "states that prohibit bank garnishment." In our research we found no state that bars garnishment of deposit accounts outright. The phrase usually comes from confusion with state limits on wage garnishment, or from automatic account exemptions like the ones below, which protect a set amount but still allow a creditor to reach the rest. If a customer tells a branch employee that "this state doesn't allow bank garnishments," the right response is to route the question to the legal-order team, not to agree or disagree.

Automatic Exemptions the Bank Applies vs. Exemptions the Customer Must Claim

Automatic exemptions are amounts or funds a statute or regulation tells the bank to leave untouched when it receives an order. The customer does not have to file anything. If the bank freezes them, the bank has made the error. The best-known automatic protection is federal: under Part 212, the bank must calculate a protected amount for directly deposited federal benefits and give the customer full and customary access to it, and the account holder has no requirement to assert any exemption first (31 CFR 212.6(a)).

Claimed exemptions are protections the customer must assert. The bank freezes under its normal procedure, sends whatever notice and claim forms state law requires, and then waits for one of three things: a court order, a creditor release, or a statutory deadline that triggers release. Most state exemptions for specific types of property, such as wages traced into an account, pension proceeds or a tool-of-trade allowance, work this way.

The distinction drives three procedure decisions:

1. What to calculate at intake. Automatic exemptions are calculated during the initial review, alongside the Part 212 account review, and never frozen.
2. What to send the customer. Claimed exemptions depend on the customer getting the right notice and forms on time. Some states make the bank responsible for mailing them.
3. What triggers a release. Automatic amounts are never held, so there is nothing to release. Claimed amounts are released only on the event the statute names.

States With Automatic Account Exemptions

The following examples come from each state's own statute or court or agency publication. They show how different the mechanisms are. The amounts are indexed or adjusted on set schedules, so always confirm the current figure on the official source before you update a system table.

New York: the Exempt Income Protection Act rules

New York's protections for bank accounts sit in the Civil Practice Law and Rules (CPLR), largely through amendments made by the Exempt Income Protection Act. Three provisions matter most to banks:

• Direct-deposit exemption (CPLR 5222(h) and 5205(l)). If direct deposit or electronic payments reasonably identifiable as statutorily exempt payments were made to the debtor's account during the 45 days before the restraining notice was served, the bank must not restrain a set dollar amount in the account. If the account holds that amount or less, the restraining notice is void as to the account. "Statutorily exempt payments" include sources such as Social Security, SSI, veterans' benefits, public assistance, workers' compensation, unemployment insurance and pensions.
• The current figure. The statute sets the base amount and requires adjustment every three years, starting April 1, 2012, using the change in the regional Consumer Price Index, rounded to the nearest $25. The New York Department of Financial Services (DFS) publishes the adjusted amount. DFS lists the CPLR 5205(l) and 5222(h) amount as $3,425, effective April 1, 2024, with the next adjustment scheduled for April 1, 2027. Adjusted amounts do not apply to restraining notices served or executions effected before the adjustment date.
• Minimum-wage protection (CPLR 5222(i)). A separate subdivision says a restraining notice does not apply to an amount tied to 240 times the greater of the federal or New York minimum hourly wage. Because New York's minimum wage differs by region and changes over time, this figure moves. Have counsel confirm how your bank calculates it and how it interacts with 5222(h).

New York also bars the bank from charging the debtor a fee when it cannot lawfully restrain the account, or when a restraint is placed in violation of the CPLR (CPLR 5222(j)), and it gives the bank specific duties on claimed exemptions, covered below.

Massachusetts: a flat exemption per person

Massachusetts General Laws chapter 246, section 28A exempts $2,500 of a natural person's money held in a bank account from attachment by trustee process. When served, the bank answers as subject to attachment only the amount above $2,500. Businesses, trusts and organizations cannot claim the exemption, and no natural person is entitled to more than one $2,500 exemption at any one time, so a bank with several accounts for the same individual needs a rule for which account carries it. The statute also gives the creditor a route back to the court if the bank's records show the exemption was already used.

California: an automatic amount adjusted every July 1

California Code of Civil Procedure section 704.220(a) exempts, without a claim, money in a judgment debtor's deposit account up to the minimum basic standard of adequate care for a family of four, a figure the California Department of Social Services adjusts annually. The Judicial Council's materials revising form EJ-156 (Current Dollar Amounts of Exemptions) list the amount as $2,325, effective July 1, 2026, up from $2,244. Where one debtor has several accounts at the same institution, the institution protects the aggregate amount rather than the full amount in each account.

California layers a second automatic protection on top for directly deposited Social Security and public benefits (CCP 704.080), with separate amounts for single and multiple payees. Under 704.220(b), the general exemption does not reduce those other exemptions; if another automatic exemption gives a larger amount, that one applies instead. Check the current EJ-156 for every figure.

Keep in mind that a state's creditor-exemption scheme may not govern its own tax orders. California's Franchise Tax Board, for example, says its Orders to Withhold for personal income tax collect 100% of available assets, while its vehicle registration and court-ordered debt orders collect after required exemptions.

Exempt Sources: Wages, Pensions, Public Assistance, Retirement Accounts

Beyond automatic amounts, customers often claim that the funds in the account come from an exempt source. Common categories under federal and state law include:

• Wage garnishment limits under the Consumer Credit Protection Act apply to the employer's withholding from pay, not to the account balance once paid. Some states extend wage protection into the account for a period after deposit; others do not. The customer usually claims this, and the creditor or court decides.
• Federal benefits paid outside Part 212. A Social Security check deposited at a teller window is not counted in the Part 212 account review, but the funds may still be exempt under federal law. The customer asserts that against the creditor.
• Public assistance, unemployment and workers' compensation. Many states exempt these. Some, like New York, build them into an automatic direct-deposit rule.
• Pensions and retirement accounts. Protection for IRAs and pension distributions depends on the type of account and the state's statute. A deposit account and an IRA are different products with different rules; staff who handle both should understand the IRA account types the bank offers and route IRA orders to someone who knows them.

Processors should not decide whether claimed funds are exempt. Their job is to send the required notices, log the claim, and follow the release trigger in the statute or the court's order.

Layering State Exemptions on Top of the Part 212 Protected Amount

Part 212 sets a floor, not a ceiling. The rule preempts state law only to the extent of an inconsistency, and it states that a state requirement to protect benefit payments at a higher amount is not inconsistent if the bank can comply with both (31 CFR 212.9(b)).

A workable order of operations:

4. Check for a Notice of Right to Garnish Federal Benefits (212.4). If the order carries one from the United States or a state child support enforcement agency, follow customary procedures for that order.
5. Run the Part 212 account review within two business days and calculate the protected amount: the lesser of the balance or the benefit payments directly deposited in the two-month lookback.
6. Apply the state's automatic exemption according to the state statute's wording. Some statutes protect a fixed amount in the account; some protect a larger amount only where specific deposits occurred; some say the larger of competing automatic amounts applies. Whether the state amount is added to the federal protected amount or compared against it depends on that wording. Get a written interpretation from counsel for each state you operate in and build it into the system.
7. Freeze only what remains under the order, and send both the Part 212 notice (212.7) and any state-required notices and claim forms. Part 212 lets the bank amend its notice to integrate state rules and protections (212.7(d)).

Worked example (illustrative)

A New York customer has $5,000 in a checking account. SSA deposited $1,400 by direct deposit within the two-month lookback, and the restraining notice arrives with exemption forms. The Part 212 protected amount is $1,400. Because an SSA payment was also directly deposited within 45 days of service, CPLR 5222(h) also applies. How the bank combines those two numbers, and whether 5222(i) adds anything, is a legal interpretation your bank's counsel must make and document. What does not change: the $1,400 is never frozen, no fee comes out of protected funds, and the customer receives both the federal notice and the state forms. The illustration uses round numbers and is not legal advice.

Releasing Funds After a Successful Exemption Claim

Claimed exemptions end in a release, and the release trigger is set by state law. New York is the clearest example of a statute that puts the bank in the middle of the process (CPLR 5222-a):

• The creditor must serve the bank with the restraining notice, an exemption notice and two exemption claim forms. Failure to serve them together voids the restraining notice.
• Within two business days after receiving the restraining notice or execution, the bank mails the debtor a copy of the restraining notice, the exemption notice and the two claim forms.
• The debtor has 20 days from the postmark to return a claim form to the bank and one to the creditor.
• When a claim arrives, the bank promptly notifies the creditor of the release date. Unless the creditor objects within the window, the bank releases the claimed funds eight days after the date postmarked on the envelope containing the executed claim form.

Other states route claims through the court, with the bank releasing only on a court order or the creditor's written release. Whatever the state, build three controls:

• Diary the deadline the moment a claim or objection arrives, using the date the statute names (postmark, receipt or service).
• Recheck before release for a creditor objection or court order received since the claim.
• Document the release with the claim, the date and who approved it. Part 212 records must be kept for at least two years from receipt of the order (212.11(b)).

Keeping Exemption Tables Current

Exemption amounts change on fixed schedules (New York every three years from April 1, 2012; California every July 1) and through legislation. A stale table is a wrongful freeze waiting to happen.

• Assign an owner. One person in compliance owns the exemption table and the citations behind it.
• Calendar the known dates. Put each state's adjustment dates in the compliance calendar with a reminder ahead of time to pull the new figure from the official publisher (DFS in New York; the Judicial Council's EJ-156 in California).
• Watch for effective-date rules. New York applies an adjusted amount only to restraining notices served on or after the adjustment date. Orders already in process stay on the old figure.
• Cite the source in the table. Every row should list the statute, the publishing agency and the date checked.
• Test after each change. Run sample orders through the system after an update to confirm the new amount is applied.

For state-specific background on creditor and wage orders, PayrollTrainingCenter maintains a reference on state garnishment laws. It is a starting point; your table should still cite the statute itself.

Build the Federal Layer First

State exemptions sit on top of one federal calculation every processor must master: the Part 212 account review and protected amount. The federal benefit garnishment rule course teaches how to determine the lookback period, calculate the protected amount and the amount available for garnishment, and handle the account-holder notice, fees and record retention. Get that layer right and your state exemption procedures have a sound base.

Frequently Asked Questions

What bank account garnishment exemptions does the bank apply automatically?

The federal one applies everywhere: under 31 CFR Part 212, the bank must protect directly deposited Social Security, SSI, VA, railroad retirement and federal civil service benefits received in the two-month lookback, up to the account balance, without the customer asking. Some states add their own automatic protections. New York, Massachusetts and California each require banks to leave a set amount untouched in certain circumstances. Everything else is generally a claimed exemption the customer must assert against the creditor or in court.

Which states prohibit bank account garnishment?

We found no state that bars garnishment of deposit accounts outright. The question usually mixes up wage garnishment limits, which some states set tightly, with deposit accounts. What some states do is protect a set amount automatically. Massachusetts exempts $2,500 per natural person from trustee process, and New York and California have their own indexed amounts. A creditor can still reach funds above those protections, subject to Part 212 and any exemption the customer proves.

What is the New York exempt amount for bank accounts?

New York DFS lists the CPLR 5205(l) and 5222(h) amount as $3,425, effective April 1, 2024, with the next adjustment scheduled for April 1, 2027. It applies when statutorily exempt payments, such as Social Security or public assistance, were directly or electronically deposited in the 45 days before the restraining notice was served. CPLR 5222(i) adds a separate protection tied to 240 times the higher of the federal or state minimum hourly wage. Always check the DFS page for the current figure.

Does a state exemption replace the Part 212 protected amount?

No. Part 212 sets a federal floor that applies first. A state can require more protection, and Treasury's rule says a higher state protected amount is not inconsistent with Part 212 if the bank can comply with both. How the two amounts combine depends on the wording of the state statute, so get counsel's written interpretation for each state and build it into your system. The Part 212 protected amount is never frozen in any case.

Who decides whether claimed funds are exempt?

Not the bank. For claimed exemptions, the customer asserts the exemption against the creditor, through the claim process the state provides, or in court. The bank's role is to send the notices and forms the law requires, log the claim, track the deadlines and release funds when the statute, the creditor or the court says to. In New York, for example, the bank releases claimed funds eight days after the postmark on the claim form unless the creditor objects.

Is money from an IRA exempt from garnishment?

Often, but it depends on the state and the type of account. Protection for retirement funds comes from state exemption statutes and, in some cases, federal law, and it can change once money moves from the IRA into a regular deposit account. Banks should not decide these claims themselves. Route garnishment orders against IRAs to staff who understand the products, follow the state's notice and claim procedure, and release only on the event the statute or the court specifies.