How To Open A Bank Account That Creditors Cant Access
When it comes to garnishment, certain kinds of bank accounts may be out of the reach of debt collectors and creditors:
- In some states, a bank account jointly held by a married couple may be exempt from garnishment if the debt in question is owed by one spouse but not the other. However, if both spouses owe the debt, the account isnt necessarily protected.
- An account opened at a bank in a state that bans account garnishments likely would be shielded from creditors. Keep in mind, though, that some banks may not let out-of-state residents open accounts.
- You may be able to safeguard money that you know is exempt from garnishment by keeping it in a bank account thats separate from your other accounts. For instance, if you can prove that an account contains only Social Security benefits, you should be able to protect that money.
- In many states, some IRS-designated trust accounts may be exempt from creditor garnishment. This includes individual retirement accounts , pension accounts and annuity accounts.
- Assets held in whats known as an irrevocable living trust cannot be accessed by creditors. Creditors can, however, dip into a revocable living trust. As their names suggest, an irrevocable trust cant easily be changed once its in place, while a revocable trust can easily be changed. People use a living trust as an estate-planning tool.
Keep Your Head Out Of The Sand
Bank account garnishment shouldnt be a surprise. You know when you cant pay your bills and start missing payments. And ignoring the consequences just makes them worse. So dont throw away notices from creditors even if they make you queasy. Stay in contact and arrange an affordable repayment plan with your creditors.
If you dont get sued, you avoid most kinds of garnishment. And if you do get sued, show up in court. Even if you know that youre going to lose. You cant ask for an affordable payment plan if you dont make your case.
Similarly, the IRS and other government agencies will provide notice that they intend to levy your bank account before they do it. If you dont throw away those notices unread, youll know whats happening and can take steps to avoid garnishment.
What Funds Are Exempt From Garnishment
As mentioned, federal benefits such as Social Security and VA benefits are generally exempt from garnishment, but there are exceptions in those cases, and they arenât the only kinds of funds that are protected.
Exceptions to exempt Social Security funds are federal student loans and tax debt, and any child support you owe.
Other forms of income and government benefits that canât be garnished are state disability benefits for the aged, blind, or disabled most pensions state welfare child support payments you receive supplemental security income benefits and unemployment benefits, with the exception of owed child support.
Some money in your bank account may also be protected. This can amount to $2,000 for consumer debt such as credit card debt or $2,500 if your only judgment is for a private student loan debt. In addition, $500 in your account is exempt for all other debts, plus $1,000 in additional cash for a total of $1,500. In addition, any payments issued by the federal government in response to the COVID-19 pandemic, including Economic Impact Payments and child tax credit payments, may be exempt from garnishment.
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How A Levy Works
A bank levy is usually the result of a months-long process, so understanding the timeline can help you potentially avoid the levy. It starts once you fall behind on payments. Depending on the contract you signed, your lender may consider your account delinquent after one or more missed payments. The lender will likely report those missed payments to the , which can damage your credit history.
Eventually, the creditor may try to recoup its money by filing a lawsuit and proving to the courts that you owe the debt. The creditor has to notify you at this point, which should signal that a levy could be in your future. If the creditor successfully gets a court judgment against you, it has stronger tools to collect that debt. One of these tools is a bank account levy.
Once the creditor receives the go-ahead for a bank account levy, it must provide the judgment to your bank. The bank will freeze your account and send the appropriate funds to the creditor. You wont be able to access the money in your account until the creditor gets the money its due.
Dont Borrow Where You Bank
When you look for a mortgage, auto loan, or other financing, dont borrow from the same institution that houses your savings. What if its too late for that? If you have a loan thats going sideways, open an account elsewhere, transfer your money to the new account and stop direct deposits to the old one before its too late.
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Create A Base Password And Then Add To It
Dontget too stressed about the prospect of managing multiple passwordsthere are plenty of tricksand tools out there to help you.
Weismanrecommends this technique for creating account-specific passwords: First, choosea base sentence that includes a mix of letters ,numbers and symbols .
Next,add to this password for each account. Weisman gives an example with the basepassword, IDontLikePasswords1! If you follow this method, your next passwordcould be something like IDontLikePasswords2!!
You Clicked On A Phishing Scam
Whenever you get an email from your bank, make sure its actually from them. Phishers can set up elaborate, official-looking emails that appear to be from your bank. They may even say that your bank account has been compromised, and you need to log in immediately.
Once you click their link and enter your login information, they have full access to your account. Sometimes they will even initiate the scam by texting your phone instead of emailing you.
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S You Can Take To Protect Your Bank Account
Phishing, scamming and stolen identity problems we have all heard about them. But how do you ensure that you dont become a victim? Once you go through the process of choosing a savings or checking account, its important to keep the funds inside them and yourself safe. Illegal access to your financial records is one of the fastest-growing fiscal crimes today. Check out some ways you can protect your bank account below.
Protecting Bank Accounts With A State Wildcard Exemption
If the first two options aren’t available, you’ll want to explore whether your state offers a wildcard exemption. A wildcard exemption allows you to protect any property of your choosing up to a particular value. However, some states limit the application by excluding specific property, such as real estate equity. And a few state wildcard exemptions can’t be used for account funds, but that’s the exception, not the rule.
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Open A Bank Account In A State With 100% Wage Garnishment Protection And Favorable Bank Levy Laws
In a bank levy, a judgement creditor can request the bank to freeze your bank account and take all the funds from your account, unless there are exempt funds. In a wage garnishment, the creditor takes a portion of your monthly salary until the debt is satisfied.
States have different bank levy laws. There are states with favorable bank levy laws, meaning a portion of your funds can be protected from being totally levied even if they do not fall under the classification of exempt funds.
For example, in New York, banks cannot restrain the first $1,716 in any bank account not receiving directly deposited statutorily exempt payments while this amount goes up to $2,500 if the account is receiving exempt payments.
Other states with a high amount of exempt funds from a bank levy are South Carolina , Maryland , North Dakota , and New Hampshire . While some states including Florida, Hawaii, and Texas do not offer any additional protection when it comes to a bank levy, unless the source of the funds are all legally exempt.
When it comes to wage garnishment, most states protect 75% of your income. This means that the creditor can only take 25% maximum of what youre earning. However, there are states that protect 100% of your paycheck from garnishment including North Carolina, South Carolina, Florida, Texas, and Pennsylvania.
How A Philadelphia Bankruptcy Law Firm Can Help
The process of filing bankruptcy can be confusing. You need to choose the best type to file, attend court hearings, and complete complicated paperwork. Having someone on your side to represent you and give you advice can be a lifesaver.
A bankruptcy law firm in Philadelphia can help walk you through the process. In addition, they can even help you figure out how to protect as much of your property as possible.
You are better off contacting a law firm as soon as you are served with a summons. Your attorney can help you decide if any of your bank accounts may be exempt. They can also help you determine if bankruptcy is the best option and create a plan to move forward.
Sadek and Cooper Law Offices are also foreclosure defense attorneys. They can also help you keep your home, preventing further hardship.
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Do Creditors Have Access To Your Money
Creditors, legally known as judgment creditors, who have payments in arrears can sue debtors for money owed. Different types of creditors can legally access your money in different ways, depending on several factors, like who the creditor is and how much you owe.
Either way, a creditor can reclaim any money owed using the below methods:
- Bank levy
- Wage garnishment
- Tax refunds reclamation
Knowing the difference between creditor and debtor is crucial here, as youre likely to see both terms.
- person or entity that is trying to get access to your funds
- Debtor person or entity that owes the money
Practice Tips For Dealing With Bank Account Freezes And Seizures
Tip #1: Where only one of two account holders owes a judgment debt, consider splitting the joint account into two accounts and keeping all of the non-debtors funds in the account that is solely in the non-debtors name. Paying expenses first from the account that is in the judgment debtors name will reduce the balance in that account and minimize the amount that is vulnerable to seizure.
Tip #2: Remove the judgment debtors name from any account where the funds really belong to someone else, such as a child or elderly family member. If the owner of the funds needs the judgment debtor to manage the account, use a power of attorney or the account should be clearly designated as a trust.
Tip #3: Place funds on a prepaid card, such as those sold at big box or drug stores, or by opting for wages sent via a payroll card, if available. Funds in an account linked to a prepaid or payroll card may be subject to seizure, but, as a practical matter, judgment creditors are less likely to seize these types of accounts, particularly if the funds are held at a smaller bank. Check the prepaid and payroll card fees and understand how to avoid high fees, especially by using only ATMs in the cards network. Avoid prepaid cards, debit cards, or checkless checking accounts offered by payday lenders and check cashers, which may have high fees or even overdraft fees.
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Never Share Your Banking Information With Anyone
In order to protect your financial life, you never want to share any of your sensitive information via text, email, phone, social media or any other messaging app.
If you call the bank directly, thats fine .
But if you ever receive a request to share your information, do not respond or provide any piece of information about yourself.
Thieves are looking to collect any bit of information on you that they can, so eventually they will be able to put the pieces together and gain access to your accounts. So never respond to any correspondence that did not originate from you!
Keep in mind that scammers have found ways to make emails, texts and other messages look exactly like the real ones you get from your bank or other company even using the exact logos and language youre used to seeing. So if you get a request or update that your information is needed for something, call the bank or whatever company that sent the request directly.
Bottom line: do not respond to any unexpected request for your information. Contact the company directly to verify the request.
Relocating To New Brunswick
If you owe monies to your creditors then one option you might want to consider is moving to New Brunswick which has been described as a debtors haven. I can recall a phone call many years ago with a civil servant, responsible for supervising the conduct of collection agencies in New Brunswick, who described her province as a debtors haven.
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European Account Preservation Order
The new rules on a European account preservation order procedure allow for the blocking of a debtor’s bank account. Creditors can freeze the amount owed to them in a debtor’s bank account located in the EU, if there is a risk that the enforcement of their claim would be impeded or made more difficult if the order were not to be issued.
This order can be crucial in debt recovery proceedings because it prevents debtors from moving their assets while the enforcement of a judgment is pending.
How To Use A Business Bank Accounts To Avoid Garnishment Or Levy
A garnishment is often different than a levy which is brought against an individual. The creditor levy does not have the right to go after a corporate bank account that is attached to an LLC even if the accused is a director or member . The levy would have to be brought against the corporate entity as there is more than one individual involved.
It is much more difficult to go after a bank account held by a company rather than an individual, and even more difficult to go after an offshore LLC as opposed to a domestic LLC, and even more difficult to go after a multi-jurisdictional offshore trust and offshore LLC. There are many reasons for this that are beyond the scope of this article, however, simply stated, it is because a court case must be brought within the country where the corporate entity is located. As well as, offshore jurisdictions have high barriers to entry, which may include 1-2 year statute of limitations and significant proof of fraudulent transfer against the party involved.
Because countries have their own sovereignty, each country much respect the legal system and can not interfere in the country’s due process. This is why foreign court orders have little bearing in another country. Places and structures like the Nevis LLC and a Cook Island Trust have many barriers that prevent all but the most ardent creditor to get access to your funds.
If My Bank Account is Levied Can I Open a New Account?
Can a Corporate Bank Account Owned by an LLC be garnished?
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Can A Creditor Go After All Your Money
Certain incomes and funds are exempt from being levied or garnished. In most cases, you will need to follow specific procedures that may vary from one state to another to prove the exemptions.
These procedures may include filing a form with the court, proving that the funds fall within these categories. You can use these exemptions to protect your real estate and other funds.
Even so, you might encounter difficulties proving this, such as when different funds end up lumped together.
We will go through some examples of what can happen and what you can do about it but first, lets go through the different kinds of exemptions that a court might recognize.
Protect Your Cash Stash: Save Money Safely
A savings account is NOT a safe place to store your cash! Aside from offering significantly low interest rates, bank accounts often get reported to the IRS and are accessible by creditorseven without your foreknowledge, in some situations. Saving a lot of money in conventional bank accounts can actually make you a target!
Three financial vehicles often used to keep cash safe from harm are Retirement Accounts, Cash Value Accounts , and Annuities. Lets take a look at each.
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How Does Banking As A Service Work
To access the BaaS platform, a digital bank, fintech, or other third-party providers or non-banks pay a fee to a BaaS provider, like EMBank. We then make our APIs available to the non-bank business, granting them access to our systems and the information required to provide their own label of banking services or develop new banking products.
Protect Your Bank Account From Garnishment Call Us At 215
Garnishment can eat away at the funds you need to live and pay down your debts. While you might consider debt consolidation to make your debt easier to pay, it wont protect your bank account from garnishment.
Luckily, a bankruptcy attorney in Philadelphia can help you navigate the process to protect your money.
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Resources For More Information
- NCLCs Collection Actions Appendix H provides detailed state-by-state summaries of each states exemption laws that apply to wages, homestead, bank accounts, tangible personal property, benefits, retirement plans, other intangibles, and tax refunds. Statutory citations are provided, and details regarding extraterritorial application and the relation of state exemptions to federal bankruptcy exemptions are also listed.
- NCLCs Collection Actions : Chapter 10 Chapter 13 Chapter 14 Chapter 15 and Chapter 16 .