In the not-so-distant future, Social Security checks will no longer be in the mail.

The paper version of Social Security payments will go into full retirement by March 1, 2013, and anyone who receives federal benefits after that date will be required to accept those payments electronically.

While the shift to direct deposits will save trees and be a great convenience to many Americans receiving Social Security and other federal benefits, it also could open the door for creditors to freeze bank accounts belonging to the growing number of senior citizens in financial trouble.

"In the cases I've had, these bank accounts were frozen by judgments usually brought on by credit card companies," said Catherine Martin, an attorney with Neighborhood Legal Services Association in Pittsburgh, a free legal service for low-income residents. "Usually I just call the bank and, if they've made a mistake, typically the bank will correct it. If they didn't immediately correct the problem, I didn't want to delay the solution so I'd file court papers."

Courts are supposed to schedule a hearing within five days of someone filing a claim involving a frozen bank account holding Social Security benefits, but very often it takes longer, Ms. Martin said.

Although federal law restricts creditors from garnisheeing Social Security, Supplemental Security Income and veterans benefits to fulfill debts, financial institutions have continued to allow it to happen.

At a Senate Finance Committee hearing in September 2007 titled "Frozen Out: A Review of Bank Treatment of Social Security Benefits," senators heard from one man whose bank account was frozen by creditors for 23 days, denying him access to his Social Security funds.

A study conducted by the U.S. Inspector General one year later, which looked at 12 of the largest banks in the country and a sample of smaller institutions, concluded that 70 percent of them had garnisheed funds from accounts where only Social Security benefit payments were deposited. The inspector general estimated at that time that about $178 million each year was being illegally garnisheed from exempt bank accounts.

More senior citizens are under more financial pressure now than at any other time in history.

Americans age 55 or older experienced the sharpest rise in bankruptcy filings during the 16-year period between 1991 and 2007, according to a report released by AARP. The rate of personal bankruptcy filings among those ages 65 or older grew by 125 percent, while the bankruptcy rate of seniors ages 75 to 84 jumped a stunning 433.3 percent.

The American Bankers Association responded to the Senate study in a May 2008 memo explaining that banks often are caught in the middle when a consumer account containing federal benefit payments is garnisheed.

"On the one hand, a creditor having received a court order entitling it to payment expects a bank to comply with that order or risk incurring liability for the full amount of the judgment," the memo said. "On the other hand, a debtor [who] receives benefit payments that are exempt from garnishment expects the bank to refuse to pay the creditor funds that are protected."

These situations typically involve commingled funds, according to the bankers association. When funds from more than one source are combined in one account, it is impossible for a bank to know what funds deposited in the account are exempt from being garnisheed and what should be paid to the creditor.

Frequently, the situation is complicated even further by the use of joint accounts and by laws that create exceptions to the exemption from being garnisheed. For instance, Social Security and other federal benefits are allowed to be garnisheed for the collection of child support and alimony.

The government mails more than 135 million benefit checks each year, at a cost of more than $125 million. About 10.5 million people receive Social Security and SSI payments by paper check each month.

Today, 85 percent of federal benefit recipients receive their payments electronically, either through bank deposits or a debit card issued by the Treasury Department. Once all paper checks are replaced, it is expected to save 12 million pounds of paper in the first five years alone.

New enrollees in the Social Security system will have to switch to electronic deposits beginning on March 1, 2011, and existing check recipients must make the switch by March 1, 2013.

"To protect Social Security benefits, a person should have the Social Security check routed to a separate bank account from all other assets and income," said Amy Corwin Sagen, director of program services for the National Association of Social Workers Pennsylvania Chapter.

She said opening a dedicated Social Security bank account might give beneficiaries some protection from being garnisheed unless they are in trouble with a federal agency for child support, alimony or unpaid taxes.

"In the long run, this step ... will save you headaches and protection from creditors, mortgage companies and other loan companies looking for repayment of loans and lines of credit through your Social Security funds," Ms. Sagen said.

Meanwhile, new rules are being either instituted or considered to protect Social Security recipients before the system goes 100 percent paperless.

Sens. Herb Kohl, D-Wis., and Max Baucus, D-Mont., have introduced legislation to halt the direct deposit requirements until stronger protections against account garnishment and freezing have been established.

Among other suggestions, they have recommended that financial institutions be granted safe harbor when they protect funds in exempt accounts.

Also, they are proposing that creditors should not be permitted to challenge the rule and recipients should have full unlimited access to their accounts, meaning banks should not be allowed to limit a beneficiary's access to funds to only a single bank branch.

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