New Virginia Garnishment Rules Shift Burden to Banks: How Financial Institutions Must Prepare

A new Virginia law taking effect July 1, 2026, significantly changes how financial institutions must handle garnishments by requiring an upfront review of customer accounts and automatic protection of certain exempt funds. The legislation shifts responsibility from judgment debtors to depository institutions, creating new operational and compliance obligations that mirror, in part, existing federal benefit-protection rules.

Under the legislation, a depository institution served with a garnishment summons must review all accounts of the named judgment debtor and treat certain funds as automatically exempt. The law creates a state framework similar to the federal framework under Social Security Administration (SSA) regulations that protect benefit payments.

Changes Under the New Law

Under current Virginia law, a debtor whose property is subject to garnishment must claim exemptions with the court that issued the garnishment. A depository institution has no duty to make exemption determinations; it simply delivers funds identified in the garnishment to the court, and it is the debtor’s responsibility to claim any exemption.

The new law changes this approach by requiring depository institutions to automatically exempt certain funds for the debtor’s benefit. The legislation establishes automatic exemptions in two ways: (i) a minimum protected amount of up to $1,000, and (ii) a protected amount representing certain electronic benefit payments made to the debtor’s account or accounts.

Minimum Protected Amount

Upon receipt of a garnishment summons, a depository institution must examine all accounts for which the debtor is an account holder and hold as exempt a total combined amount of up to $1,000. This minimum protected amount may not be withheld from the account holder, and the financial institution must provide full and customary access to those funds.

Beginning on April 1, 2027, and at the end of each three-year interval thereafter, the minimum protected amount will increase based on changes in the Consumer Price Index.

Protected Amount

If the minimum protected amount is greater than $1,000, additional automatic exemptions for electronic benefit payments may apply. The depository institution must perform an account review to determine whether certain electronic benefit payments were made to the debtor’s account and, if so, automatically exempt those amounts. The new Virginia framework largely mirrors the federal framework under SSA regulations that protect benefit payments.

A depository institution must exempt one or more benefit payments made to an account within the two months immediately preceding the day before the account review. A benefit payment is defined as funds received from (i) a federal authority listed in the SSA regulations, or (ii) a Virginia agency or Virginia court for unemployment benefits, public assistance, workers’ compensation, or child support.

A depository institution that already complies with SSA regulations will generally have procedures in place to automatically exempt the federal benefit payments identified in the new Virginia law. However, with respect to benefit payments made by a Virginia agency or Virginia court, a depository institution will need to adopt new procedures to identify those payments and automatically exempt them from garnishment.

A depository institution must not withhold any protected amount from the debtor and must allow the debtor full and customary access to those funds.

If the garnishment is for a child support debt, involves a purchase-money transaction, or if an exemption is otherwise prohibited by law, a depository institution should not conduct an account review, and no automatic exemptions apply. The new law does not clearly address how a depository institution will be made aware of the existence of these exceptions.

Joint Accounts

With respect to the minimum protected amount, the legislation requires a depository institution to review accounts for which the judgment debtor is an account holder. Although the legislation does not expressly address joint accounts, because all joint parties are generally deemed to own the account, a judgment debtor should be viewed as an account holder for purposes of applying the minimum protected amount.

With respect to the protected amount for benefit payments, consistent with SSA regulations, a depository institution must consider whether benefit payments are made to a joint account and, if so, apply the automatic exemption.

Notice

A depository institution that establishes a protected amount must provide notice to the judgment debtor consistent with the notice required under SSA regulations. Existing notices used by depository institutions may be modified to address the automatic exemptions under the new Virginia law.

Good Faith Protection

The legislation provides that a financial institution has a duty to protect benefit payments only if information provided by the payer identifies the payment as one entitled to a benefit payment exemption. The law also provides that a garnishee that acts in good faith is not liable to any person.

If you have questions about how this new Virginia garnishment law may affect your institution’s garnishment procedures or compliance obligations, please contact the author of this alert, Jay Spruill.