Bank Account Garnishment
When debtors continually refuse pleas to pay back what they owe, creditors may resort to bank account garnishment, which allows a collection agency to legally take money from your account to fulfil an outstanding obligation. Loan businesses won’t go to the trouble of garnishing a debtor’s bank account until their mailed notices and phone contacts have failed to resolve the issue.
A creditor must get a judgement to garnish your account, according to the law. To put it another way, the lender must file a lawsuit, which necessitates the use of an attorney to notify both the borrower and the court. An order or writ of garnishment signed by a court official is required before a creditor can begin removing monies from a debtor’s account. Only the Internal Revenue Service (IRS) has the authority to seize funds from bank accounts without a court order.
Garnishing your bank account is not the same as garnishing your wages. A court-ordered wage garnishment entails your employer withholding a portion of your pay and sending it to your creditor. Because the deduction occurs before your paycheck is cashed, your bank is not involved in a wage garnishment. It’s conceivable for creditors to garnish both your pay and your bank account at the same time in exceptional circumstances.
Is it Possible to Have Your Bank Account Garnished Without Notification?
When a garnishment is allowed by the court, the creditor will notify you before contacting your bank to start the garnishment process. The bank, on the other hand, is under no legal responsibility to notify you when funds are withdrawn owing to an account garnishment. If the garnished amount is larger than your available account balance, you may receive an automated overdraft message. Your creditor, not your bank, should be the one to notify you of the garnishment.
After your bank has been alerted, it must comply with the court order before honouring any further transactions you’ve planned. Individuals who receive federal benefits have their last two months’ worth of deposits evaluated to see which ones are exempt, according to federal law. If you feel your bank account is being garnished, inform your bank immediately so that the monies can be properly excused.
When Your Account Is Garnished, What Happens Next?
Money that isn’t protected from garnishment will be blocked and seized when a creditor garnishes your checking account. If the creditor tries to withdraw more money than you have, some institutions may charge ou pas fund (NSF) fees. Even if you have overdrafts, the bank may be required by law to complete the transaction until the garnishment is completed. Some banks will additionally charge a separate garnishment fee.
Account garnishment may or may not result in the loss of your full amount, depending on where you live. Bank garnishment regulations vary by jurisdiction, but most states impose a garnishment cap based on a percentage of your disposable income. This guarantees that debtors have enough money to cover their basic needs. Certain sorts of earnings are particularly exempt from garnishment. Direct payments of federal benefits, such as Social Security, are, for example, safeguarded to some extent in every state.
What Should You Do If Your Account Has Been Garnished?
You might try to call the collection agency and discuss alternate payment arrangements to get the garnishment protection account. You might be able to cut your interest payments, reduce your debt, or make partial payments for a period. If you contact your creditor before a judgement is entered, you will have more negotiation leverage. It’s in your best interest to avoid having your account garnished in the first place.
In circumstances where the garnishment was imposed in error, inadequately executed, or poses a substantial financial threat to you, you can appeal the judgement. If you decide to contest the garnishment, you should get legal advice and move immediately because you may only have five business days to do so. If you can’t afford an attorney, look for legal assistance clinics that provide free or low-cost services.
A garnishment can be stopped by filing for bankruptcy, but this should only be used as a last resort. When you file for bankruptcy, an injunction prevents most creditors from phoning, sending letters, or initiating lawsuits or garnishments against you. The creditor who filed the lawsuit against you can ask the court to release the injunction, but only in extremely limited circumstances; this does not indicate that your obligation will be discharged. Even if you file for bankruptcy, you may still owe money.