Can Debt Collectors Take Money From Your Bank Account? - MagnifyMoney

Can Debt Collectors Take Money From Your Bank Account?

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If your unpaid debts pile up, creditors can sue to obtain a court order to recover funds through bank account garnishment (the legal right to seize assets to pay debts). While debt collectors often garnish wages, they can also garnish bank accounts through bank levies.

As part of that garnishment process, banks can freeze your assets. Depending on your state, you may be able to protect some of your money, but creditors will try to recover as much as they can.

Why do debt collectors garnish money?

Debt collectors take several steps before turning to garnishment, and you can avoid having them seize your assets if you pay what you owe. First, creditors will send you past due notices, which are legal notices that you’ve fallen behind on payments. Sometimes, they’ll offer to work out a debt payment plan, so a debt collector doesn’t have to get involved.

If you still haven’t paid your creditor back, they may turn to a debt collector who will often take a more aggressive approach in contacting you to recover the creditor’s money. If you ignore them, they may turn to the legal system and file a lawsuit against you. Judges can issue a court order to compel your employer or bank to work with creditors to pay your debts through wage or bank account garnishment.

Can you fight debt collectors in court?

Yes, you can argue your case against the creditor. An attorney can help you respond to collections claims, document your situation and provide you with legal advice.

Legal proceedings start when the creditor files a complaint with the court, and you have the right to respond to the complaint with your side of the story by filing a counter affidavit and a formal response to your creditor’s claims. You could also file a motion for installment payments, and a judge may order installment payments instead of garnishment.

There are some situations when you can avoid collections. You might be off the hook if the debt collector takes illegal actions (like lying to you about how much you owe). Familiarize yourself with the Fair Debt Collection Practices Act, which protects you against some unfair debt collection practices.

If the statute of limitations on a time-barred debt collection has expired, you may not have to pay it back. Discharging your debt through bankruptcy is an extreme option to prevent bank account garnishment.

How debt collectors find your bank accounts

If your creditor wins their lawsuit, they could try a few different ways to get their debts repaid. Since wage garnishment is a dependable way to collect, debt collectors may try to garnish your paychecks. If not, they may try to garnish your bank accounts instead.

Even if you don’t give them your bank account information, they might be able to find it anyway.

  • Prior payments. If you made some payments on your debt, your creditor likely kept the records and can refer to them to find the accounts you used for payments.
  • Credit applications. Debt collectors report the delinquent debt to credit agencies, and they may ask them for any credit applications you’ve made in the past.
  • Skip tracers. Debt collectors can hire skip tracers who specialize in finding people who are difficult to track down to contact them about the debt.

Debt collectors have a lot of tools and resources to find deposit accounts. In the end, they turn to the court. You could be held in contempt if a judge orders you to tell creditors where you have bank accounts and if you don’t do it.

How debt collectors gain access to your accounts

If a creditor wins a judgment against you, they could take money from your bank account through a bank levy. As part of the judgment against you, a judge’s writ of execution will direct law enforcement to enforce the collection of debts. Bank levies can force financial institutions to allow creditors to take money from a savings account or checking account to repay your debt.

Creditors will send a bank levy notice, and you can file a claim of exemption to prevent them from accessing some of the money. Once that legal process has finished, the bank will freeze your account and your creditor will be able to withdraw what the judge orders.

Avoiding bank account garnishment

The best way to avoid garnishment is to pay your debts promptly. If you make the required payments, your debt won’t be sent to collections. Even if you fall behind on a certain amount of money, creditors may create a payment plan to help you pay your debt over time. Garnishing wages or bank account balances are often the last resort for creditors.

You can run into problems when you ignore creditors and debt collectors, who will try to contact you in various ways. They’ll eventually turn to the courts to collect the debt, and if the situation escalates to that point, you can fight back against the creditor in court. Be sure to keep all the documents you can in case you challenge the lawsuit — your lawyer may find a loophole.

Once a judgment has been issued against you, there’s not much left you can do to keep a creditor out of your checking account or savings account. But, if you believe that the case was fraudulent in some way, you can try to appeal the judge’s decision or report the issue to the Federal Trade Commission (FTC).

Learn more about how to pay off debts with our MagnifyMoney guide.

Frequently asked questions

Yes, if a debt collector successfully sues you, they can obtain a writ of execution to seize your assets, including money in bank accounts.

Financial institutions can freeze your accounts for various reasons, including if you’re suspected of fraud or other illegal activity. They will also freeze your account if a bank levy has been granted for unpaid debts.

No, wage garnishments and bank garnishments are different. Creditors garnish wages by taking money from your paycheck, but they garnish bank accounts by having the bank freeze the funds in your account and withdraw money.

Yes, there are limitations to how much money creditors can garnish from wages or bank accounts, and some kinds of funds like social security benefits cannot be garnished.

It depends on when the writ of execution is issued and when the creditor sends the bank levy to your financial institution.