When debt collectors call you day and night, demanding money that you don't have, it is easy to get intimidated, particularly if they threaten to seize your assets to pay off your debt. While getting your finances in order should be a top priority, New York law requires debt collectors to get a court order before seizing assets to satisfy most debts.
Debt Collector
Contrary to what they might want you to think, debt collectors, also known as collection agencies, do not have far-reaching powers that allow them to take your money against your will. While debt collectors do have the right to contact you about your debt, they cannot seize your assets or garnish your wages without a court order, except to collect past due child support, taxes or student loan payments.
Getting a Judgment
In most cases, a debt collector must win a lawsuit against you before it can seize your bank account. The debt collector must have you served with a summons to appear in court, and you are entitled to a hearing before a judge. You, or your lawyer, have the right to dispute the validity of the debt, and require the debt collector to prove that the debt is yours. If the debt collector proves its case, the court will award it a judgment against you.
Account Seizure
Some creditors will begin the process of seizing money from your bank account by asking your bank to "freeze" the account. Your account still exists, and you can deposit money into your account, but you won't be able to withdraw funds. The creditor may have the sheriff or marshal in your area take money out of the account to satisfy your debt, or may approach you about setting up a payment plan.
Exempt Income Protection Act
The Exempt Income Protection Act of 2008 is a New York law that protects some of the money in your account from being frozen or seized by a creditor, providing that the debt is not related to taxes, child support or student loans. If the balance of your account is less than $1,740, or $2,500 and includes directly deposited Social Security, welfare, pension, alimony, child support or government benefit income, it cannot be frozen or seized by your creditor. (Federal law also prohibits the seizure or garnishments of most Social Security, retirement or government benefit income. Supplemental Security Income, also known as SSI, can never be seized or garnished, even to pay taxes, student loans or child support.)
Prevention/Solution
Court judgments are embarrassing, costly and damaging to your credit report. But they don't happen overnight as creditors usually don't go to court unless they think you won't cooperate with collection efforts. Don't ignore past-due bills or communications from creditors: Many creditors and debt collectors are willing to work with you to set up a payment plan or even to settle debts for less than what you owe. Be sure to get the terms of your settlement or payment plan in writing before sending any money. If negotiation doesn't work, talk to a credit counselor or bankruptcy lawyer about your options.
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