Civil suits and Savings Bonds
Monday, November 20th, 2006
Categorized as: Cashing in US Savings Bonds
Can Savings Bonds be seized as an asset in a civil suit? If I have a portfolio containing several thousand dollars in Savings Bonds and a judgment is found against me in a court of law during a civil suit, can they come after my Savings Bonds?
Tom’s response
According to lawyers at the Treasury, each series of bonds has its own regulations, but the general rule for paper bonds is that the Treasury will redeem a Savings Bond after a judgment against the owner or co-owner.
However, the court would have to levy against the Savings Bonds, seize them, and send them to the Treasury with appropriate documentation. The Treasury won’t reissue the bonds, but will redeem them to the extent of the money judgment.
So there has to be more than just a money judgment. There has to be a levy proceeding in addition to the money judgment, and the court must have possession of the bonds.
The rules for electronic bonds on TreasuryDirect are similar, but only for judgments against owners, not co-owners. In addition, there’s no physical bond to possess with TreasuryDirect, so that’s not a factor.
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Tom Adams
Regarding your reply about Civil Suits and Bonds, if someone’s bonds were levied, siezed, and forwarded to the Treasury for payment, would the owner still owe taxes on the accrued interest as a result of the forced redemption? If so, that would be a real “double-whammy.” Just curious.
So if I understand you correctly, as long as you can prevent the courts from taking physical possession of the paper bonds, it is impossible to have them taken from you.
Is that right?
Thomas – the lawyer at the Treasury didn’t directly address the tax issue, but there’s no reason the owner wouldn’t get the tax bill rather than the recipient of the funds.
Svenson – Yes, that’s what the Treasury’s lawyer said. But you would be a strong person facing a weak court if you prevailed on that basis.