Can debt collectors empty your bank account?
If you fail to make payments, creditors will try to recoup the funds you owe them. In some cases, they may take legal action and request a bank levy. This may freeze your bank account and give creditors the right to take the funds directly from it.
Key takeaways
Debt collectors can't access your bank account without legal authorization. In most states, they need a court judgment to freeze or levy your account.
Debt collectors can only take money from your paycheck, bank account, or benefits—which is called garnishment—if they have already sued you and a court entered a judgment against you for the amount of money you owe. The law sets certain limits on how much debt collectors can garnish your wages and bank accounts.
Collection agencies can access your bank account, but only after a court judgment. A judgment, which typically follows a lawsuit, may permit a bank account or wage garnishment, meaning the collector can take money directly out of your account or from your wages to pay off your debt.
A frozen bank account is a sure sign that a creditor or debt collector has obtained a court judgment against you (or your joint account holder, if you have a joint bank account). A creditor or debt collector cannot freeze your bank account unless it has a judgment.
Retirement accounts like 401ks and IRAs have special protection from creditors and debt collectors. Under federal law, 401ks and other ERISA-qualified plans cannot be garnished by creditors. IRAs also receive protection up to $1 million (adjusted for inflation) under federal bankruptcy law.
A bank levy is a one-time action, but the creditor or collector can return to court to request it again.
If you notify the debt collector in writing that you dispute the debt within 30 days of receiving a validation notice, the debt collector must stop trying to collect the debt until they've provided you with verification in response to your dispute.
- Call and write the company. ...
- Call and write your bank or credit union. ...
- Your bank or credit union might use stop payment orders. ...
- Monitor your accounts.
What States Prohibit Bank Garnishment? Bank garnishment is legal in all 50 states. However, four states prohibit wage garnishment for consumer debts. According to Debt.org, those states are Texas, South Carolina, Pennsylvania, and North Carolina.
What happens if you never pay collections?
If you don't pay, the collection agency can sue you to try to collect the debt. If successful, the court may grant them the authority to garnish your wages or bank account or place a lien on your property. You can defend yourself in a debt collection lawsuit or file bankruptcy to stop collection actions.
If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
Key Takeaways: Debt collectors may be able to access your bank account to get money you owe. In most (but not all) cases, the collector must get a court order to take money from your account. It generally takes one-to-two weeks for banks to execute a garnishment order.
California is a Community Property State
As a result, it is possible for a creditor to garnish a spouse's bank account if their spouse owes a debt.
How a Debt Collector Gets Access to Your Bank Account. A debt collector gains access to your bank account through a legal process called garnishment. If one of your debts goes unpaid, a creditor—or a debt collector that it hires—may obtain a court order to freeze your bank account and pull out money to cover the debt.
If you did not receive a notice about the garnishment of your account, ask your bank for a copy of the garnishment order that it received. You can also contact the creditor or the court that issued the order for more information.
In addition to federally and state-provided assistance, things like child support payments, student loans, workers compensation and pension funds are also exempt. If you have less than two months' worth of certain benefits in your account, these are automatically exempted.
Creditors might be able to garnish a bank account (also referred to as "levying" the funds in a bank account) that you own jointly with someone else who isn't your spouse. A creditor can take money from your joint savings or checking account even if you don't owe the debt.
While your levied account is frozen, you can open a new one. Be sure to move any automatic bill payments that you've set up to the new account so that you don't miss any payments and fall deeper into debt.
In the case of a bank levy, funds in the account are frozen as of the date and time the levy is received. Normally, the levy does not affect funds you add to your bank account after the date of the levy.
What do I do if my bank account is levied?
You must send a Claim of Exemption within 15 days of when you received the Notice of Levy (20 days if you received it in the mail). If you wait longer than this, the sheriff will give the other side the money and you won't get it back.
By paying the collection agency directly, the notification of the debt could stay on your credit report longer than if you attempt to use another option, like filing for bankruptcy. When institutions check your credit report and see this information on it, it may harm your ability to obtain loans.
If you continue to ignore communicating with the debt collector, they will likely file a collections lawsuit against you in court. If you are served with a lawsuit and ignore this court filing, the debt collection company will be able to get a default judgment against you.
You'll get notices and possibly calls from the creditor seeking payment. At some point, usually after 120 to 180 days of nonpayment, the creditor — such as a credit card company, bank or medical provider — gives up on trying to collect.
While it's shocking that someone could be denied access to their own money, it is unfortunately entirely legal for creditors to freeze bank accounts as long as they have a judgement against the debtor.
