Can Collection Agencies Access Your Bank Accounts?

Collection agencies usually come into your life when you owe a debt and their attempts to address the debt do not succeed. Although collection agencies might come across as being all-powerful entities, they have certain limits on what they can do in order to satisfy a debt. While they can gain access to your bank accounts at times, there are restrictions.

Court Order

In order for a collection agency to gain access to your bank accounts, the agency needs to have the courts file a judgment against you. If the court finds in favor of the collection agency, meaning the court feels the debt is justified and correct, you are known as a "judgment debtor."

Exempted Funds

Even if you're a judgment debtor, certain funds are usually protected. These funds vary from state to state, so check with a state attorney to find out which funds are exempt. Usually, the funds include Social Security benefits as well as unemployment payments and public assistance. In addition, a certain amount of your wages are exempt, with the percentage varying from state to state. Other funds that might be exempt include child support and alimony. In order to make sure the funds remain exempt, remind both the bank and the creditor of the exemption status. Doing this in writing provides physical evidence in the event you later take legal action against either the bank or collection agency.

Frozen Assets

When the bank is notified by the collection agency about the judgment filed, the bank "freezes" any funds that aren't exempt. When an account is frozen, you can't write any checks or withdraw any money from the account. If there are already checks written on the account when it becomes frozen, you need to contact the check holders to make other payment arrangements.

Protection

Consumers have certain protections, one of which is refusing to conduct any business over the telephone. By notifying the collection agency (in writing) that you wish all contact to be conducted through the mail, the collection agency cannot continue calling on the telephone. In addition, having all business written will lessen any confusion over what was promised and what was delivered. Remember that if there are any agreements about settling the account, those agreements need to be in writing.

Settling

There are times when it is best to settle with a collection agency. Get all agreements to settle in writing. Get documentation that once the debt is paid, the collection agency will delete the information from your credit reports. This move can add a few points to your credit score.