Your bank account is essentially frozen when it is garnished or “levied” by a creditor or debt collector for unpaid debt. You can pay money in, but you cannot take money out with a few exceptions.
For the majority of people who find themselves in that situation, that is devastating. And for the many people who choose not to defend the court case in which a garnishment order is made, life may become unfeasible.
Most states don’t allow you to request exceptions from the court for necessities like food, rent, utilities, and transportation costs. And you may be left destitute.
However, there are steps you can take to prevent the consequences if you believe you may need protection from having your bank account garnished in the future. And opening a bank account that is inaccessible to creditors is arguably the most successful of those strategies.
Account garnishment can be a stressful and overwhelming experience, leaving you with limited access to your funds. This guide will help you understand how to avoid account garnishment and protect your money from creditors.
What is Account Garnishment?
Account garnishment occurs when a creditor, with a court order, takes money directly from your bank account to satisfy a debt. This can happen when you owe money for credit cards, loans, child support, or other financial obligations.
Types of Accounts Exempt from Garnishment
Fortunately, some types of accounts are protected from garnishment, meaning creditors cannot access the funds within them. These include:
- Bank accounts solely for government benefits: Social Security, veterans’ benefits, and other federal benefits are protected from garnishment. These funds must be directly deposited into your account to qualify for protection.
- Joint bank accounts in certain states: In some states, creditors cannot garnish joint accounts unless both account holders are liable for the debt.
- Offshore bank accounts: While legal, offshore accounts are not recommended due to potential tax implications and difficulty accessing funds.
Other Strategies to Avoid Garnishment
Beyond using exempt accounts, you can explore other strategies to avoid garnishment:
- Negotiate a debt settlement plan: Contact your creditors and propose a reduced payment plan.
- File for an exemption from garnishment: Check your state’s regulations for exemptions based on hardship or income limitations.
- Discuss bankruptcy options: As a last resort, consider bankruptcy to shield yourself from certain debts.
Understanding Wage Garnishment
Wage garnishment is similar to account garnishment, but instead of targeting your bank account, it involves withholding a portion of your wages to pay off debt. Some states offer full protection from wage garnishment, including North Carolina, Pennsylvania, South Carolina, and Texas.
How to Protect Yourself from Garnishment
The best way to avoid garnishment is to manage your finances responsibly and avoid accumulating debt. Here are some tips:
- Pay your bills on time: Avoid late fees and potential damage to your credit score.
- Create a budget and track your spending: Monitor your income and expenses to identify areas for savings and debt reduction.
- Explore debt consolidation options: Combine multiple debts into one loan with a lower interest rate.
- Seek professional financial advice: Consult a financial advisor for personalized guidance on managing your finances.
Account garnishment can be a significant financial setback, but by understanding the options available and taking proactive steps, you can protect your funds and avoid this stressful situation. Remember, responsible financial management is key to maintaining financial stability and avoiding debt-related issues.
How much can creditors take from your bank account?
At your hearing, creditors may take the amount that the judge orders. Courts frequently order consumers to pay accrued interest and court fees, which together can exceed the original amount owed, according to the same Pew Report. ”.
How Does Bank Garnishment Work?
A few government agencies have the authority to garnish your bank account without a court order. These agencies are typically the Internal Revenue Service for tax debt and the Department of Education for student loan debt.
And, sometimes, your bank has a “right of offset” that allows it to raid some of your accounts to regularize others, all within the same bank. So it could, for example, take money from your certificates of deposit (CDs) to bring your checking account back below its overdraft limit.
However, you cannot allow other private debt collectors to access your bank account without a judge’s approval. They might be referred to as judgment creditors after the judge renders a decision.
To demonstrate that you are in default on your loan and that you owe the money claimed, they must appear in court. If they do that, the judge will probably issue the requested garnishment order.
Protect Your Bank Account from Garnishment
FAQ
What bank accounts in the US Cannot be garnished?
Can a creditor take all the money in your bank account?
What states are entirely immune from bank account garnishments?
What money Cannot be garnished?
Are bank account garnishments allowed?
Bank account garnishments are allowed under most state laws. If the money in the account is not exempt, the creditor can obtain the money to help pay the judgment. Bank account garnishments are relatively quick and inexpensive. They can be rewarding if there is a lot of money in the account.
Can a creditor garnish a bank account?
A creditor can repeatedly levy, or garnish, a bank during the life of a judgment. While the creditor cannot harass a judgment debtor, repeated levies or garnishments of bank accounts alone do not constitute harassment, especially if the funds in the bank account are generally not exempt. How long can your bank account be frozen for?
Can a bank account be garnished without notice?
Yes, a bank account can be garnished without notice. A judgment creditor does not need to tell you beforehand that it intends to garnish your bank account. If a creditor were required to give a debtor advanced notice of a bank account garnishment, then the debtor would have the opportunity to empty the account in advance of the garnishment.
Can a bank be garnished if you have a debt?
In addition, North Carolina, South Carolina, Pennsylvania, and Texas all prohibit wage garnishments for consumer debts. Depending on the type of judgment, there are other states where banks are totally immune from bank account garnishment.