Owing money on a credit card that you cannot pay is a stressful experience. Not only will you receive phone calls every day, even many times per day, demanding that you pay the debt, you can eventually be subject to more aggressive collections measures. If a credit card company continues its efforts and you fail to pay, your bank account may be at risk.
Lawsuit
If it is unsuccessful with phone calls and letters in making you pay the debt, a creditor may file a lawsuit against you for the amount of the debt plus collections costs. The amount is often under the threshold for small claims court in your state. You will receive notice of the lawsuit, probably by certified mail or a sheriff's deputy who brings it to your door. The court summons will have the date and the time of the court hearing, and will tell you what you need to do to respond. You should attend the hearing so that you are aware of legal actions the creditor is taking to collect the money.
Judgment
If you owe the debt, you will probably lose the lawsuit. The court will issue a judgment against you for the amount that you owe. After this, the court may hold another hearing where it will ask you about any resources that you have to pay the debt. It could also ask you about any bank accounts that you have. Even if you do not disclose some bank accounts, the creditor has ways to locate accounts in your name. At this point, you may still be able to work out a payment arrangement to prevent a levy against your accounts.
Garnishment or Levy
The creditor can serve notice on a bank that holds your accounts. The notice will tell the bank that you owe the creditor money, and they have a court order from a judge that requires the bank to turn over any funds in your account. The bank will then put a freeze on the funds in your account for a certain time period, usually a few days, while it notifies you of this pending action. If you do not do anything, the bank will turn the money over to the creditor. It will continue doing this until the debt is paid, or until you file for bankruptcy or the court stops them. This will also include any future direct deposits into this account.
Exceptions
Some money is exempt from garnishment. Income from child support cannot be garnished or levied to pay a debt. Most federal benefits fall under the same exemption. If your account has money received from exempt income, it is up to you to prove this. During the time that the bank is holding your money before turning it over, you can file a claim with the court stating that the money in the account is exempt. If you co-mingle funds in the account with non-exempt funds, it is more difficult to demonstrate the exemption. Consider keeping child support or federal benefits in a separate account if a creditor threatens to levy your bank accounts.
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