Know when your money may be confiscated and when it cannot. Debt can arise unexpectedly, even if you have done all possible to avoid it. You may have to use your credit cards to make ends meet because your spouse was laid off, or a medical cost has left you thousands of dollars in the red.
Even scary is when a debt collector reaches you requesting payment after you haven’t recovered financially. Unauthorized withdrawals of funds from your bank account are a legitimate concern for many people. If debt collectors are attempting to gain access to your bank account, it’s important that you understand your rights and options.
How your bank account is accessed by a debt collector
No debt collector may remove money from your bank account unless you give them permission to do so or a judge orders it. According to Leslie H. Tayne, an attorney and author of Life & Debt, creditors cannot freeze your bank account without a judgment in most jurisdictions. According to her, “bank account execution, commonly known as a bank levy,” would typically take place once a judgment was entered.
Other day-to-day financial activities such as debit card use, ATM withdrawals, and automatic bill payments are also affected by a bank charge, which is in addition to losing money. You should be aware of the early warning signs that a debt collector has you and your bank account in its sights before it gets to this point.
The Fair Debt Collection Practices Act (FDCPA) mandates that when a debt collector contacts you, they must send you a letter describing the specifics of the debt. A 30-day window for disputing the debtor requesting validation of the obligation will open when that happens.
If the debt collector proves that you owe them money, and you don’t pay it, they have the legal right to sue you. This is the beginning of the bank levy procedure. Some creditors may not need to use the bank levy procedure to have access to your bank account, though. Suppose, for example, that you owe the United States government money, such as a federal student loan or unpaid taxes.
A government agency does not need a court order to reclaim debt owing to them. Levying your bank account, garnishing your paychecks, and seizing tax refunds are all ways in which this can be done. Similarly, if you owe money to a creditor who also happens to be your bank, your contract may provide that the creditor has the right to take money out of your deposit account to pay off past-due debt.
Debt collectors can sue you, but what happens if they win?
Court dates and times will be sent in a letter to those who are being sued, so that they may plan their schedules. A judgment against you will be entered if the debt collector prevails in court, thereby stating that you are legally obligated to repay the amount. The collector can then visit your bank with the judgment in hand and request a bank account execution in order to collect on the debt at this point.
Tayne recommends calling your bank as your initial course of action. “Since your account may have been frozen for a variety of reasons, there isn’t a single fix that works for everyone. Those who owe money might apply for an exemption if any of the monies in the account are eligible.” As far as Tayne is concerned, frozen cash can be kept for up to a year or longer, depending on local state rules.
It’s possible to apply for an exemption form if you have funds in the account that are exempt from a bank levy (such as Social Security or disability benefits), and you can reclaim some of that money.
How much money may a debt collector take from your account?
There are consumer laws in place that restrict the amount of money that a debt collector may take from your bank account. Nevertheless, state laws on bank levies differ, sometimes even within a single state.
“If you reside in upstate New York, your bank is prohibited from taking or freezing your first $2,338 under the state’s Exempt Income Protection Act. There is a $2,640 fee in the five boroughs “Tayne explains this to you. > The first $2,750 in a bank or credit union account in downstate Long Island cannot be taken by a bank to pay a judgment, whether or not your account contains exempt funds.”
As a result, it’s critical to speak with a lawyer in your state to learn about the specific regulations that apply to your situation in order to know what you’re up against.
Deactivating any direct deposits to the levy bank account could be a good idea while you wait for the bank to release the monies.
Is it possible for a debt collector to pursue a bank account that is not in your name?
It’s scary enough that a debt collector is chasing your money, but the anxiety you experience when you think about your loved ones’ savings is amplified. If they have a bank account in their own name, they are unlikely to have their money taken or charged. When it comes to joint bank accounts, the manner they were first set up might have a significant impact on the outcome, depending on the legislation in effect in your state.
If you reside in a Common Property state, the legislation governing whether a debt collector can levy an account that isn’t in your name also varies.
Is it a good idea to allow a debt collector to have access to your bank information?
You have rights when dealing with a debt collector, even if the interaction feels threatening.
FDCPA safeguards prohibit debt collection agencies from harassing or bullying you. This may entail requesting your social security number, bank account information, and other private details.
Unless you are subpoenaed by a debt collector, you are legally not compelled to divulge any information to a debt collector, therefore it is crucial to say as little as possible to them, explains Tayne. Everything you say to a debt collector may and will be used against you, and I can’t stress this enough.
Tayne advises that if you are called, you are not obligated to instantly give your personal information. The creditor or collector should undertake the work of finding your personal information instead. The following are a few possibilities on how they can go about doing this:
- Past payment records, such as e-checks or electronic payments.
- Examining previous credit applications for any indications of the name of your bank.
- Subpoenaing local banks and credit unions to see if you are a customer or a member is one option.