Can debt collectors take money from your bank account to offset debts you owe them? Unfortunately, the answer is yes. But it takes a lot to get to that scenario, so if you’re not there yet you still have time to learn how to protect yourself from this type of collections activity.
To start, here are our top tips for keeping debt collectors from your bank account:
In truth, it's fairly rare to have a bank account that no creditor can touch. While laws in your state might help protect your accounts from private collectors, if you owe tax debt or other federal or state funds, your accounts might be up for grabs.
However, there are some types of accounts that are less susceptible to garnishment. Here are a few:
As you can see, there's a lot of "ifs" and "maybes" here, and there's a reason for that. This is a very complicated aspect of financial law, and if you're looking to legally find a way to make your accounts creditor-proof, it may be a good idea to talk to an attorney.
In the meantime, here are some other things to do if you're worried whether debt collectors can take money from your savings account or checking account.
Creditors can't just attack your bank accounts because you were a little late or stopped paying your bills. To be able to levy or garnish your accounts, creditors and collection agencies have to go through legal channels. Typically, the process looks a little like this:
Usually, it takes a decent amount of time for all this to take place. If you can get enough money together at any time prior to the garnishment to pay the collector or make an agreement for payment, you might avoid having your bank accounts garnished.
Unfortunately, it's possible to get surprised with old debt you didn't even know about. Sign up for ExtraCredit to keep an eye on your credit reports and score so you can head off these issues before they start impacting your bank accounts!
It's also important not to ignore summons for lawsuits. Even if you can't pay the money, show up. If you don’t show up, the creditor will likely be granted a judgment against you for the full amount you owe anyway—and you could face other legal issues. If the creditor doesn't show up or can't prove the debt, then the case might be dismissed.
You may or may not still owe the money—that depends on the specifics of your case. However, without a judgment, the creditor can't seek to take money from your bank accounts.
Obviously, it's ideal to consult an attorney if you can regarding any lawsuit you're named in. But even if you can't, don't ignore the summons.
Did you ever wonder: How do debt collectors find your bank account to begin with? A common answer is that you gave them all the information they needed.
If you have ever set up electronic payments from your checking account or paid with a check, that company has your checking account information. They can use that to file for garnishment once they have a judgment.
It's also a good idea not to share your account information with others or put joint account holders on your account unless you trust them implicitly. Someone else on your account could run up debt and put the funds at risk.
Keep in mind that it’s not always possible—or legal—to keep accounts 100% secret. Collectors can file discovery briefs with the court that require you to respond with information about your bank accounts and other finances, for example. But at least in this case, you simply didn't hand over the information without making them work for it.
Ultimately, the best way to open a bank account that no creditor can touch is to take a proactive approach to all your money management. Check your credit regularly, pay your bills on time, and work with creditors when you fall behind to make payment arrangements and avoid a lawsuit. You can sign up for the free Credit Report Card for additional information on your credit so you're never caught off guard by this type of collections activity.