As much as owing debts is inevitable, one biggest fear is having your account wiped out by your debt collector. Imagine needing funds for something urgent only to discover you have no money. It’s more embarrassing when you discover you’re penniless because your creditor decided to clean up your account.
As much as this sounds illegal, debt collectors can take your money from your bank account. While this doesn’t happen often, there are situations where your debt collector can have access to the funds in your bank account.
When Can Debt Collectors Take Money From Your Bank Account?
Although it is rare for debt collectors to have access to your bank account and withdraw funds, this can happen when a lawsuit has been made. If a debt collector files a lawsuit and wins, he becomes a judgment collector and you are supposed to immediately make payments or agree to a debt repayment schedule. If you ignore this, then the debt collector can make a request based on a court order to your bank to freeze your account.
Once this request is presented to your bank, they have no other option than to freeze your account. At this point, the judgment creditor can ask for a transfer of funds from your account to theirs as payment for your debts. This act is usually referred to as a levy, garnishment, or bank account attachment.
Can Debt Collectors Garnish Your Bank Account Without a Court Order?
A debt collector can garnish your bank account without a court order if they’re federal or state-owned agencies. If you’re owning a government organization like the IRS or even the US Department of Education, they don’t need to provide your bank with a court order to withdraw funds from your account. All they need to do is provide you with prior notice of their intention to garnish your bank account following your refusal to pay up your debts.
Sometimes your debt collector doesn’t have to be a federal or state-owned agency, it could be your bank or credit union. Before opening an account at any bank or seeking a loan from credit unions, they usually state their legal terms. Often referred to as Right of Offset or Right of Setoff, banks and credit unions can take money from your account to cover installment loan debts and mortgages.
Credit unions are a lot more rigid than banks when it comes to their Right of Offset. They can even go as far as withdrawing money from a joint account you share and even taking out funds for past credit card debts.
How to Prevent Bank Garnishment from Debt Collectors
If you are worried about money being taken from your bank account by debt collectors, then you should try to prevent this. Here are steps to help you avoid bank garnishment
1. Pay Up your Debt
The best way to avoid bank garnishment of any sort is to pay up your debts as soon as you can. When your debts are cleared, there’s absolutely no reason for any creditor to levy your bank account. If you can’t pay up quickly, make sure to inform your creditors with valid reasons as to why payment is slow on your end. Make sure to communicate with them and create a payment plan that’s suitable for you
2. Show Up in Court
If you’ve been served a lawsuit by your debt collector, the decent thing to do is to show up in court. Do not discard notices and act like it’s nothing. Make sure you appear in court as directed by your creditor. Even if the chances of winning the lawsuit might be extremely low, appearing in court shows you’re responsible. You could even come to a more reasonable repayment schedule with your debt collector.
3. Create a ‘Safe’ Account
There are certain bank accounts that debt collectors cannot garnish. Sometimes, it’s quite difficult to garnish a joint account, unless both spouses owe the same credit. Better still, you can register and create an account with banks in states that are totally against garnishment. While these types of banks may not cater to out-of-state customers, there are a few who will.
4. Don’t Borrow From Your Bank
Although it is usually tempting to borrow from your bank based on how convenient it is, it is a wrong move. Doing this is especially wrong if you’re borrowing from the same bank where you save. In a situation where you’re being served a garnishment order, the bank can choose to take out money from your savings account.