Your debts don't disappear simply because you don't have the funds to pay them back. Even if you honestly can't pay, if you let it get to the point that a creditor sues you, you may end up with serious financial problems. After receiving a judgment against you, the creditor can garnish your wages. If you don't have a job, the creditor can garnish your entire bank account balance, leaving you with no money for necessities.
No Limit
Bankrate.com reports that unlike wage garnishments, where the creditor must leave you enough money to live on, there are no limits on the percentage of your bank balance that a creditor may garnish from your account. The creditor may garnish all the funds currently in your account to pay the judgment. Depending on state laws, the creditor may also garnish funds deposited into the bank account after the initial garnishment, if the debt is not yet completely paid.
Overdrafts
The creditor may not cause an overdraft by garnishing more from your bank account than you currently have in the account. However, the creditor garnishes the bank account by ordering the bank to place a freeze on your funds for the amount of the judgment. Thus, if you write checks on your account while the garnishment is in effect, the checks will bounce. You will then be responsible for paying insufficient check fees and any other penalties assessed by your bank or the creditor you were trying to pay with the check.
Proper Notice
The creditor typically notifies the bank of the garnishment prior to notifying you about it. This policy stops debtors from trying to get around a bank garnishment by withdrawing all money from the account prior to the date the garnishment goes into effect. Your notice, which Fair Debt Collection says you typically receive a day or two after the bank puts a hold on your funds, contains information about your rights, including how to contest the garnishment if you feel it is unfair.
Warning
Bank account garnishment is one of the most serious measures creditors can take against debtors, as the creditor can take all available funds and place a freeze on your bank account until the debt is completely repaid. Most creditors reserve this action for debtors who quit their jobs to avoid wage garnishment, or who otherwise try to avoid paying a debt back even after a creditor has gone to court and received a judgment against the debtor. You can avoid bank account garnishment by contacting your creditors if you have problems paying your bills, rather than allowing debts to go to collections.
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