Denise Bruce in her home. Her bank accounts were frozen and she lost protections for her federal benefits because of a money transfer.

(Keith Muccilli/For NJ Advance Media)

If you owe a debt, there are certain steps a creditor can take to get paid.

The creditor can take you to court and win a judgment against you. To collect, the creditor can put liens on properties, garnish wages or put a freeze on your bank account, also called a bank account levy.

But if you have a government benefit like Social Security direct deposited into your account, the account is protected against non-government debtors. The IRS could get at those funds, but collection agencies, by law, can't take your federal benefits.

Those protections failed Denise Bruce of Andover because of a series of mishaps and misunderstandings.

Bruce has two checking accounts and two savings accounts with Wells Fargo.

One of the checking accounts -- the one that receives her direct deposits from Social Security Disability (SSDI) -- was compromised in December, and Bruce said she planned to close the account.

She'd first need to redirect her SSDI to a new checking account.

She opened the new account, also at Wells, and she asked Social Security to make the switch.

But her February deposit still went into the old account.

"I had to manually reroute my Social Security monies into the new account because I didn't want it to stay in the hacked account," Bruce said.

But those transfers, she'd learn, would become the root of her problems.

On Feb. 15, Bruce's debit card was declined at a supermarket.

She called Wells and learned there was a "legal debt order" on her four bank accounts so the accounts were frozen. The bank charged her $125 for the freeze.

A screen shot of the judgment against Denise Bruce found on a Virginia court website.

The bank's legal department said she should call the creditor and if it was a mistake, the creditor could send the bank a letter releasing the accounts, Bruce said.

Bruce called the Virginia law firm whose number was attached to the freeze, and was told it was a debt of $793.38 from an unpaid doctor's bill. Interest since 2012 brought the balance to $1,315.19.

Bruce said she saw the doctor for two appointments in 2011, but said the visits should have been covered because she had Medicare and a supplemental insurance plan.

She said she never received any overdue bills for the appointments.

She explained this to the collections attorney, who wasn't interested in reasons, Bruce said. The debt would stand.

Then Bruce did some research and learned her SSDI funds are exempt from non-federal debt collectors, so she went back to the attorney.

"I told him that my funds are exempt from non-federal debts and asked him to please lift the hold on my accounts," Bruce said. "He then stated that it was not his or his client's problem and that it was a fundamental mistake on the part of my bank, and that I will have to deal with Wells Fargo."

She contacted Wells several times, and on Feb. 22, a rep offered to help her file a complaint so the bank could investigate.

"I explained that this was a potential crisis situation because I had not been able to purchase my medications since Feb. 15," Bruce said.

Concerned, she asked Bamboozled for help.

THE LAW

We found the judgments against Bruce in Virginia's court records, and suggested she contact Medicare and her supplemental insurance to see if there was a history of payments to the doctor.

There were no records of claims by the doctor, Bruce learned.

That means there's a good chance the doctor made an error and never billed her insurance for service, so Bruce had no way to know there was an unpaid bill.

She was certainly never notified about any legal action against her, she said.

We asked Wells to review the case to explain why Bruce's federal benefits were not protected.

The envelopes from the Wells Fargo notifications. They were postmarked March 2 but the letters were dated more than two weeks earlier.

While the bank looked, on March 9, Bruce received several letters from Wells Fargo explaining her accounts were frozen. They were all dated Feb. 15, but postmarked more than two weeks later on March 2.

That was a very, very slow notification.

By this time, Wells had put a hold on $287.37 of Bruce's money for the creditor, and it took the remaining $15.50 in the account to go towards the $125 fee -- all the money Bruce had in the bank.

We looked at the law.

It's very clear what creditors can and can't do when it comes to seizing certain benefits.

"A judgment creditor cannot levy on certain monies including Social Security benefits, Workers' Compensation payments, child support and unemployment/state disability benefits," said Robert Snellings, a Parsippany-based attorney.

Certain debts to the federal government, such as IRS debt, are not subject to the same rule.

In New Jersey, Snellings said, banks are required to undertake a review of subject accounts to identify whether the funds on deposit are exempt.

And once an account is frozen, you have two weeks before the money is taken out to satisfy the judgment.

Getting the account unfrozen isn't easy.

In Bruce's case, she'd probably have to get the judgment vacated "due to non-service of summons and complaint, along with cause," said Paul Oster, CEO of Better Qualified, an Eatontown credit repair company.

That could work because Bruce said she was never notified of any court actions. But she'd have to go to Virginia to get it cleared up.

A redacted copy of one of the letters mailed from Wells Fargo to Denise Bruce about her frozen bank accounts.

Next, Bruce had additional conversations with Wells Fargo, bringing some new clarity.

A rep explained the account that received her federal benefits was in fact protected from bank levies. Her other accounts were not.

So when Bruce transferred the money from the protected account to the other accounts, the funds were no longer protected.

During the discussion, the rep agreed to a refund of the $125 in bank fees, Bruce said. She said the rep told her not to worry -- the $125 would be protected from the creditor.

That was a start, but Bruce told Social Security to mail her paper checks instead so she wouldn't risk those funds.

"But I have nowhere to cash it because no bank will cash it without having an account with them," she said. "I have been penniless since February. My bills are accumulating. And I still cannot buy my meds."

Bruce eventually cashed her check at a check-cashing joint.

Her instinct was right. After Wells refunded the $125 in fees, the creditor seized the money.

THE EXPLANATION

Several weeks passed, as did many more conversations with the bank.

We finally got a solution, sort of.

Wells Fargo agreed to assign a point person to Bruce's case -- one contact who could help Bruce collect all the evidence she'd need to fight the creditor.

Then Wells said it was refunding the money previously garnished from her accounts, including the money for the $125 fee, and it would work with Bruce to make sure that money isn't garnished again.

Since then, Bruce said, Wells twice more returned money to her, but into an unprotected account, and the creditor seized the funds both times.

Another time, Wells put $412 into the protected account to return the garnished amount and the fees. Bruce said she quickly took out $400, and the creditor took the remaining $12.

How? The account lost its protections because Bruce hadn't had an SSDI direct deposit in more than 60 days.

The bank is crediting the account with the $12 so Bruce can try to get it before the creditor does.

The bank said it will help if she chooses to close the account, or she can re-start her direct deposits again.

Bruce is weighing her options, and she plans to try to get the Virginia judgment vacated.

"I just don't know if ill be able to fix it because I really can't afford to go there," Bruce said. "A mistake like this can destroy any person living paycheck to paycheck."

Email your questions to Ask@NJMoneyHelp.com.

Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com's weekly e-newsletter.