Wednesday, March 13, 2002

Does a Credit Card Company Have to Notify Me Before Freezing My Bank Account?

Bank garnishment freezes bank accounts and allows the credit card company to withdraw money for an unpaid credit card bill. The credit card company is not required to notify you about the garnishment -- and neither is the bank. Many people discover their accounts are frozen after checks bounce or their account balance suddenly shows a huge negative balance after the full amount of the judgment is posted to the account.

Default Judgments

    Garnishment that is a complete surprise is usually the result of a default judgment in court. Default judgments occur when people fail to respond to a credit card lawsuit by showing up for a court hearing or responding in writing to the lawsuit. Stress and pressure from financial problems causes some people to ignore legal notices, including the notification of a lawsuit. As a result they fail to defend themselves against the lawsuit, leading to a guaranteed victory for the card company.

Garnishment

    After winning a judgment credit card companies may offer a payment plan with installments for the full amount. Or the credit card company may request permission from the judge for garnishment. The judge usually agrees to allow enforcement of the judgment. Default judgments are common but credit card companies usually also win when the person sued challenges the lawsuit during a hearing. There are few successful defenses for credit card lawsuits except for identity fraud or proof of bookkeeping errors by the card company. Illinois Legal Aid reports that people appearing in court challenging credit card lawsuits are virtually guaranteed to lose if the card company proves that the debt is valid and that the person sued did not pay.

Orders

    Banks promptly cooperate with garnishment orders and will not help the account holder resolve the issue. Garnishment also affects co-signers on accounts, such as a spouse. Garnishment freezes the account even if the co-signer had nothing to do with the lawsuit or the credit card debt. The owner or owners of the account are not allowed to access it during the garnishment except to make deposits. The effect is so punishing that some people file for bankruptcy to end the garnishment. However, other solutions are possible, including agreeing to a payment play with the debt collector for the full amount. Many debt collectors will agree to end the garnishment with a right to resume if the debtor does not make payments as agreed.

Prevention

    People with credit card lawsuits should settle the debt or enter into payment arrangements before the deadline for responding or appearing before a judge. The credit card company has full control after a judgment, and that makes negotiations difficult.

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