Having a credit card can be very helpful, but you have to be careful. If not, you will fall into debt and deal with the debt collector. Before you make a credit card, you need to consider something. For instance, can a credit card company garnish your bank account? Here, we will answer that question for you.
Before we answer the question: “Can a credit card company garnish your bank account?” You need to know what garnishment means. Garnishment is a legal action that allows the debt collector to access your bank account. It means that they can deduct the payment directly from the debtor’s wage or bank account.
Most of the garnishment happens when the debt collector decides to sue you and win the court. Although garnishment needs legal order from the court, there are a few cases that do not need a court order. For instance, if you have debts from the Internal Revenue Service (IRS), a court order is not required.
Even though garnishment is legal, this action remains controversial. Some states, like Texas, North Carolina, South Carolina, and Pennsylvania do not allow wage garnishment unless it’s for tax, child support, court-ordered fines, and student loans. Every state may vary in their garnishment regulations.
The Consumer Credit Protection Act is the one who is responsible to set limits for garnishment. The limit of garnishment applies to all types of debt except unpaid tax, student loans, child support, bankruptcy orders, and voluntary wage allocations.
Can a Credit Card Company Garnish Your Bank Account and Withdraw the Money?
You may wonder about the question “can a credit card company garnish your bank account?” The answer is yes, they can. If you have unpaid debt, the debt collector has the option to garnish your wage from your bank account. Moreover, joint credit cards can be garnished by the debt collector.
Debt collectors gain access through a legal order. They submit a file to sue you. If they win, they get the court order to access your bank account. They may freeze your bank account, and pull out money to pay your debt. Furthermore, they can call your employer to deduct your wage to cover the unpaid debt.
Most of the time, the creditor can garnish your bank account without notifying you. However, in some states like Florida, a creditor must notify you after serving the document garnishment to the bank. The garnishment should explain your right in the garnishment process, including the exemption you have.
Wage garnishment is the option the debt collector would take if you don’t pay your debt. This action, eventually, would affect your credit score and credit report. Credit score and credit report are necessary to open a credit card account or buy insurance. Therefore, you need to be careful with your debt.
How Much Money They Take from Your Bank Account?
The amount of debt collectors take from your bank can vary depending on where you live. If the garnishment is from a court order, the judge will determine how much money is taken from your bank account to cover your debt.
For example, in Wisconsin, the debtor can be exempt to protect their first $5,000 from their account. In California, the exemption can shield $1,826 of a consumer’s bank account as of July 2021. Delaware prohibits garnishment from bank accounts.
Another example of exemption based on the National Consumer Law Center includes:
- Maryland : $6,000
- Nevada : $10,000
- Tennessee : $10,000
- South Dakota : $7,000
- Illinois : $4,000
- North Carolina : $5,000
- Florida : $5,000
- New York : $3,600
Do research the exact exemption from your state. However, in some cases, the judgment will allow the debt collector to take all of the money from your bank account. For instance, if you’ve already used the exemption for other assets or accounts.
Be careful to whom you give your bank account for any payment. It is not rare if the debt collector mistakenly takes more than what you both agreed. If something like that happens, you might waste your energy fighting to take your money back.
What’s a Debt Collector Can’t Take?
After you know the answer to the question “Can a credit company garnish your bank account?”, another question is what the creditor can’t take from your account. Debt collectors cannot garnish federal benefits unless it’s student loans, alimony, child support, and delinquent taxes. The federal benefits include:
- Veterans benefits.
- Social security benefits.
- Railroad retirement benefits.
- Supplemental security income benefits.
- Federal student aid.
- Benefits from the Office of Personnel Management.
- Military annuities and survivors’ benefits.
- Federal emergency disaster assistance.
How to Open the Bank Account the Creditor Cannot Reach?
Knowing the answer to: “Can a credit card company garnish your bank account?” may lead you to another question “Is there a way to open a bank account that the creditor can’t reach?” There are types of bank accounts that the creditor can’t access:
- In some states, the governments don’t allow garnishment. The banks from that kind of state are most likely protected from the creditor. However, some banks do not allow out-of-state residents to open an account there.
- A married couple who has a joint bank account may be exempt from the garnishment if one owes the debt and the other does not. However, this may only work in some states and does not work if both of them owe the debt.
- Individual Retirement Accounts (IRAs), annuity accounts and pension accounts may be exempt from garnishment. It also works for other IRS-designated trust accounts.
- Opening an offshore bank account will make the garnishment more complicated and expensive.
How to Protect Bank Accounts from Debt Collectors
The answer to the question: “Can a credit card company garnish your bank account” is yes, they can. This may make you want to know how to protect your bank account from the debt collector. Unfortunately, there is not much to do if the debt collector has approval from the court.
Hiding your money or concealing your assets might lead you to another trouble. It might lead you to a federal felony and you will face jail time. Therefore, hiding your account isn’t a good option. However, if the collector doesn’t have a legal order and you’ve given your account information. You may lock or change your account.
Furthermore, there are some ways to avoid the debt collector garnishing your bank account. Here are the ways:
1. Pay Your Debt On-Time
The simple way to avoid garnishment is to keep up to pay your debt. Make sure you pay it on time, don’t let it in the garnishment stage. If you can’t do that, you may try to seek help from a credit counseling service or discuss this with your creditor.
2. Respond to Lawsuit
If the debt collector decides to sue you due to the unpaid payment, the best way for this is to respond to its calling. Don’t ignore the lawsuit, or else it will get worse. You have to file an answer to the collector’s complaint, some states might have different time or limit to file answers.
You may fill out the claim of exemption. Depending on the state, you can dissolve the garnishment by claiming the exemption.
After you file an answer. It will be set for trial. You can raise the defenses against the debt collector’s claims, such as:
- You’ve already paid the debt.
- You become a victim of identity theft.
- Claim that there is a misdemeanor in the Fair Debt Collection Practice Act (FDCPA).
Therefore, you need to respond to the lawsuit. If not, the collector will win the trial and get the approval to garnish your bank account. Review your financial records and find the errors in the suit, like the incorrect amount you owed. If this is troubling you, you can consider legal aid.
Avoid Debt Collector Garnish Your Bank Account!
Now, you know the answer to the question: “Can a credit card company garnish your bank account?”. With legal approval from the court, the debt collector can garnish your bank account.
The best way to avoid this is to pay your debt on time. Additionally, you need to show up to court and prove yourself innocent. You may claim the exemption or consult the creditor to settle the agreement.