If a person owes money on a credit card and carries the balance for long enough without paying on his bill, he may eventually face lawsuits from his creditors. The creditors will usually follow a prescribed legal process in order to attempt to collect their debt, which may eventually end with the garnishment of income sources and the possible attachment of assets of the debtor. Different types of income are treated differently in lawsuits.
Judgment-Proof
Child support income is exempt from collections in a lawsuit from a creditor. This money is for the support of a minor child, and courts will not award that money to a creditor in order to satisfy a judgment. If the only income that a debtor receives is from child support, or from other exempt sources such as federal disability benefits, the debtor is considered to be "judgment-proof."
Attachment of Bank Accounts
A common way that a creditor attempts to collect from a debtor is to search for any assets that the debtor may own. This includes real estate or personal property, such as vehicles, that the creditor can ask the court to allow it to take a lien against. Attachable assets also include bank accounts, such as checking and savings accounts. If a creditor finds an account that is in the debtor's name, the creditor can petition the court to allow it to levy the account and take any money in it. This creates special problems for child support income.
Co-mingling of Funds
Since child support income is exempt from attachment by a creditor, any child support money that is in a bank account cannot be taken by creditors. This is a problem when money is in the account from several different sources, such as child support and employment income, or money belonging to a spouse. The creditor will probably attach and take all money in the bank account, unless the debtor proves that the money in the account is exempt. Co-mingling creates problems because the sources of the funds are difficult to determine.
Protecting Your Money
If a debtor believes that he is going to be subject to a judgment and has income that is not exempt, in addition to child support, he can take steps to protect his money from attachment by creditors. He can open a separate account to deposit child support funds into and file the paperwork that the court requires to show that these funds are exempt from judgment. It is up to the debtor to prove the source of funds in the account. If the debtor co-mingles the money with other income sources, it becomes difficult to know where the money came from. If collections have escalated to the point of bank account levies, a debtor should consider filing for bankruptcy.
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