Paying bills on time is important for maintaining a good credit rating. Creditors refer unpaid accounts to collections, which lower a consumer's credit score and may affect his ability to obtain credit. While a creditor often delays the extreme collection measures, he may obtain a money judgment and freeze a debtor's bank accounts if he refuses to make payments.
Contacting the Debtor
A creditor often gives a debtor a chance to catch up on past due payments, as long as the debtor shows a willingness to do so. He may also be open to negotiating a new payment schedule. Creditors want to collect loan payments at the lowest possible cost. If a debtor is not willing to negotiate, the creditor will transfer his account to collections. If a company doesn't have an in-house collection department, it will need to hire an outside collector and pay a fee.
Obtaining a Monetary Judgment
When collection efforts fail, a creditor can file a lawsuit against the debtor and obtain a monetary judgment. A monetary judgment confirms that the debtor owes a stated amount to the creditor and allows the creditor to collect the debt by garnisheeing the debtor's bank accounts. A creditor must inform the debtor about his intentions to file a lawsuit. The debtor will receive a notice of a court hearing where he can also present his case if he believes that he doesn't owe the money. If a debtor is willing to negotiate a repayment plan, he can contact the creditor before the hearing.
Freezing Debtor's Bank Accounts
To collect the debt, a creditor must present the monetary judgment documents to the debtor's bank, which will immediately freeze the funds in his bank accounts. The bank must inform the account holder about the freeze and inform him about his rights. While a creditor may freeze the debtor's accounts, he may not be able to collect the payments. If a debtor receives a pension, retirement, Social Security, disability, alimony, spousal or child support, worker's compensation, veteran's benefits or other public assistance, a creditor may not take these types of income to repay the debt.
Seeking Legal Assistance
If a creditor freezes your bank accounts, a qualified attorney can help you gain access to the money. If you have exempt funds, he can help you file an exemption claim and to request a court hearing, where a judge will order a release of funds. If you don't have exempt funds, a lawyer may be able to find a way to vacate the judgment against you. If the court vacates the judgment, you will have access to your bank accounts.
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