Bank account garnishment means that a debt collector has successfully sued to have money taken out of your bank account. This happens if you haven’t repaid debts such as a medical bill or unpaid taxes. Your bank isn’t required to notify you of an account garnishment unless the withdrawal overdraws your balance. Depending on where you live, you may have certain rights and protections against having your bank account garnished. Bank account garnishment means that a collection agency is legally allowed to remove money from your account to repay an outstanding debt, and is usually a last resort that creditors turn to when debtors repeatedly ignore requests to pay back what they owe. Loan companies won’t take the costly legal steps required to garnish a debtor’s bank account unless their mailed notices and phone calls have failed to settle the debt. According to the law, a creditor needs to win a judgment in order to garnish your account. In other words, the lender must file a lawsuit, which requires an attorney to deliver notice to both the borrower and the court. To begin withdrawing funds from a debtor’s account, the creditor needs an order or writ of garnishment, signed by a court official. The Internal Revenue Service (IRS) is the only creditor that can garnish money from bank accounts without a judgment. Having your bank account garnished is different from having your wages garnished. A court-ordered wage garnishment requires your employer to withhold a certain amount of your paycheck and send it to your creditor. Since the deduction takes place before your paycheck is cashed, this means that your bank plays no role in a wage garnishment. In rare cases, it’s possible for creditors to garnish both your wages and your bank account at the same time. Bank Accounts That Cannot Be Garnished or FrozenIf an individual fails to pay back a loan or another extension of credit, then creditors may try to take back the debt forcibly. Creditors have a number of legal means of doing this. Among them is the garnishment of the individual’s wages and the freezing and seizure of his bank account. However, in some cases, money deposited in a bank account cannot be taken by legal force. Garnishment Versus Freezing a Bank AccountGarnishment is when an individual has some of his wages or other form of income seized before they can be given to him. This is done after the creditor has been awarded damages in a civil court and presented the debtor’s employer or other provider of income with a order of garnishment. The employer then stops the amount due to the creditor from each monthly wage check. An account is frozen in much the same way. Now, it’s the individual’s bank that is presented with an order to freeze the account and, sometimes, to let the creditor take out funds. Debtor Must Pass a Means TestSome bank accounts cannot be frozen, nor can some individuals have their wages garnished. In many states, to have a person’s wages garnished or to have his account frozen, the individual must first pass a means test. This will measure the size of the person’s income and assets. If the person does not make enough relative to his expenses, particular those related to the care of dependents, he may not be subject to garnishment or account freezing. Means tests vary by state. The court will apply the relevant means test before it makes an order for garnishment. What Can You Do When Your Account is Garnished?To lift the garnishment, you can try to contact the collection agency to negotiate alternative payment options. You may be able to lower interest payments, reduce the amount you owe, or make partial payments for a certain amount of time. However, you’ll have more bargaining power if you reach out to your creditor before a judgment is made. It’s in your best interest to prevent an account garnishment from happening in the first place. You can challenge the judgment in cases where the garnishment is made in error, is improperly executed, or presents a serious financial threat to you. If you decide to challenge the garnishment, seek help from an attorney and act quickly since you may only have up to five business days. If you can’t afford an attorney, search for legal aid offices that offer services for free or at a reduced rate. Filing for bankruptcy can stop a garnishment, but this should be considered as a last resort. When you declare bankruptcy, an injunction goes into effect that stops most collectors from calling, sending letters, or filing lawsuits and garnishments. The creditor filing the suit against you can ask the court to lift the injunction, but only under very special circumstances, but this doesn’t mean discharging your debt. You may still owe money after a bankruptcy. Here are some ways to avoid the freezing of your bank account funds: Know Your State’s Exemptions and Use Non-Exempt FundsEach state’s law provide for certain property or income which can’t be taken by creditors to satisfy unpaid debts. You should become familiar with the exemptions in your state so that you can protect your property before you have a problem and make sure that you use your non-exempt or unprotected deposits to pay bills before you deplete the deposits that are protected. If you keep a separate account for funds which you know qualify for a specific exemption from attachment, if an attachment occurs, it might be easier and quicker to have the account released to you if you can show that the account only contains funds which qualify for an exemption. If the funds are commingled or mixed with money that is not exempt, you will have to trace the deposits to prove to the court that the balance which was actually frozen came from the exempt funds. This is more complex and will take more time. If you owe money to the bank that holds your savings or checking accounts and you fall behind on your payments, the bank has the right to set off the funds in your account against the debt. As long as you owe the money to the same bank that holds your accounts, it does not need to get a judgment or court order to do this. It’s generally a good idea to keep your deposit accounts in a bank that you do not have a lending relationship with. While it is common to maintain your business bank accounts at a bank which provides you with business loans or lines of credit, you do not need to keep your personal accounts there. This way, if the business fails, you are less likely to have your personal funds taken to satisfy personal guarantees you might have given on the business loans. Bankruptcy Garnishment LawyerWhen you need legal help with a garnishment in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
Ascent Law LLC
8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506
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