How to Protect My Bank Accounts From Judgments

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In some states, a creditor who wins a civil lawsuit against you can request a writ of garnishment, which it then uses to garnish your wages and withdraw money directly from your bank accounts. Deliberately hiding money from creditors seeking a bank account garnishment is illegal. You can, however, protect the money in your bank accounts by fighting the judgment or garnishment order. You also have the right to declare certain forms of income within your bank accounts exempt from seizure.

Contest the lawsuit as soon as you receive a summons and complaint from the creditor. Your grounds for contesting the lawsuit will vary, depending on the type of debt you owe and where you live. For example, if your state enforces a four-year statute of limitations on collection lawsuits, and the debt in question is five years old, you can contest the lawsuit on the grounds that the debt is too old to legally enforce.

File an exemption notice with the court. Exemption notices vary by district, but provide your creditor with a list of your exempt income and assets. If the majority of your income is exempt from seizure, many creditors will drop their lawsuits, since they have little chance of recovering either the debt or any legal expenses they will incur by pursuing you.

Arrive in court on time on the day of the hearing. Bring any paperwork you have that supports the claim under which you are contesting the debt’s enforceability. State your case as clearly as possible and give the judge the opportunity to review your paperwork.

Negotiate a payment plan or debt settlement with the creditor if you lose the lawsuit. As long as you adhere to the terms of the payment plan, your creditor has little incentive to seize your bank accounts.

Request a garnishment exemption form from your bank if the creditor does not agree to a payment plan. Although most banks send these forms to you as soon as they receive notice of the impending garnishment, not all do. Note on the form any exempt funds within your accounts, such as child support, unemployment or Social Security benefits.

Make two copies of the bank’s garnishment exemption form. Return the original form to the bank. Send one copy to your creditor and keep the other for your records. Doing so protects all exempt funds within your bank accounts from judgment creditors.

Tips

  • If you share a joint bank account, some states only allow creditors to garnish half of the non-exempt funds within the account – even if the majority of the money belongs to you.

    If you do not receive notification of a lawsuit and the court levies a judgment against you by default, you can contest the judgment on the grounds that you were not properly served paperwork notifying you of the hearing.

    Don’t get an exemption notice and garnishment exemption notice confused. Whereas the first declares your total exempt income and assets to the court and the creditor prior to a lawsuit, the latter declares your exemptions to your bank to minimize the amount seized from your accounts.

Warnings

  • If you do not respond to and contest the lawsuit after receiving a summons and complaint from the creditor, the judge will side in favor of the creditor automatically and it will win a judgment by default – even if you had a valid defense.

References

About the Author

Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.

Photo Credits

  • Christine Balderas/Photodisc/Getty Images