Can Pre Paid Cards Be Garnished by Creditors?

When you fall behind on a debt, your creditor will typically work with you to bring your account current. A creditor may offer several options, including post-dated checks and extended repayment agreements, to help you catch up on missed payments. However, if you refuse to work with your creditor or ignore collection communications, the creditor may opt to garnish your assets, which may include amounts held in prepaid card accounts.

Authorization for Garnishment

In most cases, except when the debt is for unpaid child support or taxes, a creditor cannot simply garnish your assets without following proper legal procedures. The creditor must initiate a lawsuit against you for your debt in a civil county or district court and win a judgment against you. After the court awards a judgment, the creditor may apply for a writ of garnishment, which provides authorization for the creditor to garnish prepaid card funds and other assets you own.

Finding Pre-Paid Accounts

Before a creditor can garnish funds in a prepaid card account, it must locate the account. Because prepaid accounts do not show up on your credit report, they can be difficult for a judgment creditor to locate. In most states, the creditor can request a debtor examination, which requires you to disclose all of your assets and expenses in writing or during a court hearing. This allows the creditor to obtain information about your prepaid card accounts so that it can issue a garnishment order to take the funds held in these accounts.

Garnishment Procedure

After locating a prepaid card account and obtaining a writ of garnishment from the court, the creditor or court will send an order of garnishment to the financial institution that issued the prepaid card. The financial institution must then respond to the garnishment order, freeze the account and forward all nonexempt funds to the court for payment against your judgment debt.

Exemptions

State laws provide asset exemptions that prevent a judgment creditor from taking all of your funds -- you may typically apply exemptions to prepaid account balances to protect a portion of the funds from garnishment. For example, Ohio law provides an exemption of $1,075 of personal property, which may include assets held in pre-paid accounts. Exemptions vary considerably by state.