If you owe money to a credit card company and you stop making payments, the company can take some of your assets, or things you own, to get its money back. Money in a savings account is one asset that a credit card company can take. However, your credit card company can't just dip its hands into your account if you're a few days late on a payment. Instead, the creditor has to follow a legal process before it can take your cash. If you're told you can't access your account because a hold has been placed on it, act quickly to find out why and how you can respond. By acting fast, you might be able to recover your savings.
It is entirely possible that a credit will put a hold on your savings account in order to recoup payments which you have failed to make. However, actions such as these are often a last resort due to the costly legal fees involved.
Obtaining a Judgment
A creditor can put a hold on your savings account if you don't make payments; it can also take all of the money out of your account to satisfy your debts, but only if it's obtained a judgment against you in court. A judgment is a formal decision by the court that you owe a debt. Creditors must sue you to get a judgment against you. Once you've been sued, the court will serve you with a summons to appear in court. If you show up, you can argue your case, but the judge might still issue a judgment against you. If you don't show up, the judge will automatically rule in favor of your creditor.
Issuing a Levy
If your creditor has a judgment against you, it can tell your bank to pay the creditor out of your account balance. This is called a levy, and neither your credit card company nor your bank has to let you know if it's going to happen to you. According to the Consumer Law Center, many people find out that their accounts have been levied when their ATM cards stop working. The creditor can only take as much money out of your account as the levy is for, but if you have less than what you owe, the creditor can take it all.
Stopping a Levy Before It Starts
The first step to stopping a levy is stopping a judgment. Most credit card companies would rather not take you to court because doing so is expensive. Your creditor probably won't sue you unless you're more than six months behind on your credit card payments and you haven't made any attempt to get caught up. If you're getting collections calls and you're a few months behind, you might be able to work out a payment arrangement to avoid a levy. If your card company is about to sue, you will probably get a letter from its lawyer first. The letter might invite you to make a payment arrangement with the lawyer instead of going to court. Even if you do go to court, the judge might order a payment arrangement that works for you, allowing you to avoid a savings account levy. If all of these options fall through, you still have 30 days after the judgment is entered against you to make a payment before the company will take your savings.
Get Levied Money Back
If your savings account has been levied, there are some ways to get the money back. You can file an exemption, but you have to do it within 10 days of your account being levied. Certain funds, such as child support and Social Security benefits, are exempt from levies. If you file an exemption, you'll need to prove which funds are exempt so you can get them back. Another way to fight the levy is to declare bankruptcy, since creditors are not legally permitted to levy your accounts while you're in bankruptcy. Finally, if you got a default judgment because you didn't show up at court, you can contact an attorney and go back to court to vacate the judgment, or have it thrown out.
- Consumer Law Center: Frozen Bank Accounts
- Consumer Law Center: Vacating a Default Judgement
- Nolo.com: Bank Levies on Joint Accounts (Nonspouse)
- Consumer Financial Protection Bureau. "Can a Debt Collector Garnish My Bank Account or My Wages?" Accessed Dec. 5, 2019.
- Consumer Financial Protection Bureau. "What Is a Judgement?" Accessed Dec. 5, 2019.
- Internal Revenue Service. "What Is a Levy?" Accessed Dec. 5, 2019.
- Federal Trade Commission Consumer Information. "Garnishing Federal Benefits," Accessed Dec. 5, 2019.
- Office of the Comptroller of the Currency. "What Can I Do If My Bank Account Is Frozen and It Includes Social Security or Other Federal Benefit Payments?" Accessed Dec. 5, 2019.
- Office of the Comptroller of the Currency. "Are My Federal Benefits Automatically Protected By My Bank From a Garnishment Order?" Accessed Dec. 5, 2019.
- Internal Revenue Service. "What You Need to Know: The Federal Levy Payment Program," Accessed Dec. 5, 2019.
- Federal Trade Commission Consumer Information. "Coping With Debt: Self-Help," Accessed Dec. 5, 2019.
- Consumer Financial Protection Bureau. "What Is the Best Way to Negotiate a Settlement With a Debt Collector?" Accessed Dec. 5, 2019.
- Federal Trade Commission Consumer Information. "Coping With Debt: Debt Relief Services," Accessed Dec. 5, 2019.
- Consumer Financial Protection Bureau. "My Debt Is Very Old: Can Debt Collectors Still Collect?" Accessed Dec. 5, 2019.
- Law Office of Seth L. Hanson. "Can Bankruptcy Reverse a Wage Garnishment or Levy?" Accessed Dec. 5, 2019.
Miranda Morley is an educator, business consultant and owner of a copywriting/social-media management company. Her work has been featured in the "Boston Literary Magazine," "Subversify Magazine" and "American Builder's Quarterly." Morley has a B.A. in English, political science and international relations. She is completing her M.A. in rhetoric and composition from Purdue University Calumet.