It’s a terrible situation: you head to the ATM to get money to repair your car, for example, but the machine will not roll out any cash. To your dismay, you soon discover that your bank has frozen your account because a debt collector has won a judgment against you and is now trying to satisfy a delinquent obligation. Read on for more about debt collectors and bank accounts.
How Can My Bank Account be Frozen?
It seems like the ultimate infringement. However, it is perfectly legal for a debt collector to gain access to your bank account through a process known as a garnishment.
How it works is, if you have an unpaid debt, a creditor or debt collector may secure a court order – a garnishment — to freeze your account and withdraw cash to cover the debt.This usually happens after a collector files suit then wins a judgment against you.
Besides garnishing your bank account, a debt collector might be able to garnish your wages. That is, unless you live in Texas, South Carolina, Pennsylvania, or North Carolina. Those states may still garnish your bank account, however.
Is a Court Order Always Necessary?
Access to your account typically requires a court order. Certain federal agencies, though, including the Internal Revenue Service, may be able to gain access to your account sans a court’s permission.
Also note that it’s unnecessary for a creditor to inform you that your bank account is frozen – after a judgment has been made against you. The only notification that you must receive is that you’re being sued, and that a judgment has been issued against you.
Can They Wipe Out My Account?
How muchdebt collectors can take will depend on your state of residence. In California, for example, $1,788 is automatically protected from garnishment, a sum that must be adjusted each year for inflation.
What About Exemptions?
Except to pay child support, student loans, alimony, or delinquent taxes, most federal benefits may not be taken through garnishment. Those benefits generally include:
- Federal emergency disaster assistance
- Railroad retirement benefits
- Benefits from the federal Office of Personnel Management
- Military annuities and survivors’ benefits
- Federal student aid
- Veterans’ benefits
- Supplemental Security Income benefits, and Social Security benefits
Also, in some states, an account that is jointly held by a married couple is protected from garnishment if the debt is owed by one spouse but not the other. Further, assets, including bank accounts, that are held in a living trust cannot be accessed by collectors. You should also know that an account at a bank that prohibits account garnishments likely is protected by creditors.
How Can My Account be Protected from Creditors?
Well, of course, the easiest way to avoid getting yourself in such a nightmare scenario is by paying your debts, and on time. If you’re already in trouble deep, in terms of credit card or other unsecured debt, get information about assistance at www.freedomdebtrelief.com. Debt settlement may be your best way forward.
Respond Right Away
You don’t want to ignore a lawsuit against you, because collectors are serious about getting what you owe, up to having your account garnished. If you respond in a timely fashion, though, you may be able to get around a judgment, even.
If you are sued, you still must respond immediately, either independently or through your lawyer. So, you’ll either show up in court or submit a written response. Do make certain that you do thoroughly read the suit and look for errors, such as regarding the amount it says you owe.
When it comes to debt collectors and your bank accounts, knowledge is power. You also may want to connect with an attorney who can give you the expertise you may need.