Sunday, July 8, 2007

Should I Negotiate With the Collection Agency If My Bank Account Has a Restraint?

Should I Negotiate With the Collection Agency If My Bank Account Has a Restraint?

    Negotiating with a creditor can mean more money in the bank.
    Negotiating with a creditor can mean more money in the bank.

Exempt Income

    Even with a bank account levy, or restraint, some types of income are exempt from withdrawal. Social Security benefits, VA benefits, unemployment payments, child support and pension payments are just some of the types of income that a creditor cannot access even with a court-approved bank restraint. If these are the only types of income you have, negotiating with a collection agency can make sense if you are interested in restoring your credit and paying off the debt.

Statute of Limitations

    Collection agencies have a time limit in which to collect a debt. The clock begins ticking from the date that the debt was charged off and runs for 3 to 6 years, depending on the borrower's state of residence. Once the statute of limitations has expired, even if the collector has a garnishment on a bank account, it is not legally allowed to take any money out of that account, nor can it continue collection activities. In this case, it doesn't make sense for you to negotiate.

Bottom Line

    According to information published by the Neighborhood Economic Development Advocacy Project, negotiation with a collection agency isn't in your best interest if you cannot afford to pay the debt, if your debt is about to expire via the statute of limitations, if you are a victim of identity theft or your income is exempt from garnishment or a bank account restraint. In all other cases, it says, negotiating a settlement with your creditors can be a good idea. However, once a bank restraint judgment has been filed, negotiating with a creditor is pointless, as the amount required to pay the debt has been set by the courts.

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