Can debt collection agencies withdraw money from your bank account to help settle your debt? Unfortunately the answer is yes. But it takes a lot to achieve this scenario. So, if you’re not there already, there is still time to learn how to protect yourself from these type of gathering activities.
Here are our top tips to keep debt collection companies out of your bank account:
- Open accounts that cannot be attached
- Don’t let debts get into the garnishment phase
- Appear in court and respond to lawsuits
- Keep your bank account as confidential as possible
This is how you open a bank account that no creditor can touch
In truth, it is quite rare to have a bank account that no creditor can touch. While laws in your state can help protect your accounts from private collectors, if you owe tax debts or other federal or state funds, your accounts may be tangible.
However, there are some types of accounts that are less prone to garnishment. Here are a few:
- Escrow accounts. These are accounts that have been set up through a trust. This means that the account is owned by the trust, not you. Depending on the legal situation, the balance on the accounts could protect against your creditors. However, it can also limit your own access to the funds.
- Custody accounts. Custody accounts are accounts for minors or other persons who would otherwise not be able to keep and manage their own account. If it can be demonstrated that the money belongs to the other person and not you, creditors may not be able to attach it.
- Joint accounts. In some cases, a spouse may have some legal protection against creditors attempting to collect their partner’s money. However, this can vary depending on the state and situation.
- State benefit accounts. Accounts on which government benefits are paid, e.g. B. those that come from social security also have some special protective measures when it comes to debt collection. Some of the previous COVID-19 stimulus payments were also protected, but not all.
As you can see, there are a lot of “ifs” and “maybe” here and there is a reason. This is a very complicated aspect of financial law, and if you want to legally find a way to keep your accounts bankrupt, it can be a good idea to speak to an attorney.
In the meantime, here are a few other things you can do if you’re worried about debt collection companies being able to withdraw money from your savings or checking account.
Don’t let debt get into the garnishment phase
Creditors cannot attack your bank accounts simply because you were late or failed to pay your bills. In order to debit or seize your accounts, creditors and debt collection agencies have to take legal action. Typically the process looks a bit like this:
- You run up the debt.
- You will be billed for the debt and will be in default.
- The original creditor takes some collection action and sends you bills and statements.
- The creditor can hand over your account about the collections, and a collection agency repeats the process.
- After all, you can be sued.
- A hearing takes place and the matter is decided for or against the creditor.
- If the case is decided for the creditor, a judgment will be issued against you.
- The creditor can then seize your wages or bank accounts, or otherwise attempt to convert your property into payment for your debts.
It usually takes a long time for all of this to take place. If you can raise enough money at any time prior to the garnishment to pay the collector or to make a payment arrangement, you can avoid the garnishment of your bank accounts.
Unfortunately, old debts that you didn’t even know about can take you by surprise. Sign up for ExtraCredit to keep track of your credit reports and earnings so you can avoid these issues before they affect your bank accounts!
Appear in court and respond to lawsuits
It is also important not to ignore court summons. Even if you can’t pay the money, come over. If you fail to show up, the creditor is likely to hand you over to judgment on the entire amount you owe anyway – and you could face other legal problems. If the creditor does not show up or cannot prove the guilt, the case can be closed.
You may or may not still owe the money – it depends on the specifics of your case. However, without a judgment, the creditor cannot attempt to withdraw funds from your bank accounts.
Of course, if you can, if you can, if you can be called in a legal proceeding, it is ideal to consult an attorney. But even if you can’t, don’t ignore the subpoena.
Keep your bank accounts confidential
Have you ever asked yourself: How do collection agencies find your bank account in the first place? A common answer is that you gave them all the information they needed.
If you’ve ever set up electronic payments from your checking account or paid by check, this company has your checking account information. You can use it to file an attachment application as soon as a judgment is available.
It’s also a good idea not to share your account information with anyone or put common account holders on your account unless you implicitly trust them. Someone else on your account could run into debt and put your money at risk.
Remember, it’s not always possible – or legal – to keep accounts 100% private. Collectors can file investigative papers with the court, requiring them to provide information about your bank accounts and other finances, for example. But in this case at least, you just haven’t shared the information without getting it to work for it.
Ultimately, the best way to open a bank account that no creditor can touch is to take a proactive approach to all of your money management. Check your creditworthiness regularly, pay your bills on time, and work with creditors when you default to make payment arrangements and avoid litigation. You can sign up for the free credit report card for additional information about your credit so that this type of debt collection activity will never surprise you.
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