In most states, if a creditor wins a lawsuit against you for a delinquent debt, it can apply to the court that awarded judgment against you for a writ of garnishment. This document gives the creditor the legal right to garnish funds in your bank account, subject to federal and state limitations. If a bank account is pending garnishment, you cannot close the account.
Legal Judgment
Before a private creditor can execute a bank garnishment, it must obtain legal authorization to do so. The creditor begins the process by filing a lawsuit in a civil court, most commonly in the county where you live. The court will issue a summons and provide you with an opportunity to challenge the suit in a court hearing or in writing, depending on your state's laws. If you do not provide a response or the court does not determine that the lawsuit was filed in error, it will grant a judgment to the creditor.
Garnishment Authorization
A judgment alone typically does not give the creditor authorization to garnish bank account funds. After receiving a valid judgment, the creditor must obtain a writ of garnishment in most states. A writ of garnishment enables the creditor to contact your bank to order garnishment of funds that are not exempt under your state's laws.
Account Freeze
Once your bank receives a garnishment order from the creditor, the order creates a pending garnishment on your account. A pending garnishment requires the bank to freeze the account, which means that you do not have the authorization to withdraw funds or close the account. This gives the bank time to determine the amount of assets in your account that are eligible for garnishment so it can send the funds to the court for payment to the creditor.
Avoiding Bank Garnishment
Contacting a creditor before it decides to file a lawsuit against you can be an effective way to avoid bank garnishment. If you are behind on your debt payments, the creditor may offer a variety of solutions to avoid the expense of filing a lawsuit and executing a bank garnishment order. It may waive late fees, spread your past-due balance over several payments or reduce your interest rate to help you catch up. The creditor may also accept a settlement, which involves paying part of the account balance in a lump sum.
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