A creditor can go after the funds in your bank account to pay off a delinquent debt, and you may incur an overdrawn account in the process. Nonetheless, a creditor has to follow mandated procedures to seize money in your account. This includes suing you in court and winning a judgement against you before confiscating the money in your bank account to satisfy a debt obligation.
Collection Process
A creditor or debt collector must first win a debt collection lawsuit against you to get a court order to take money from your bank account to pay a debt. The court order goes to your bank, and the bank holds funds in your account to pay the creditor until the seizure process is completed through the court. You may not receive advance notice before the bank places a hold on, or freezes, your funds, according to the U.S. Federal Trade Commission.
Overdrafts
Your account may have insufficient funds to cover your other debts after your bank receives an order to hold funds to pay a creditor. Try to avoid having your checks bounce by asking companies and people you have written checks to not to cash them. Pay those debts from another account or send money orders to cover your payments. Your bank may charge you an overdraft fee for each check or debit card transaction that overdraws your account while your funds are frozen.
Government Benefits
The FTC indicates that creditors cant seize funds that come from some government programs. Money people receive from the Social Security Administration, U.S. Department of Veterans Affairs and civil service programs are among the payments that are exempt from seizure. Therefore, you may be able to get money you receive from government benefits released to you to avoid overdrafts if a government agency directly deposits money into an account that your bank froze to pay a creditor.
Considerations
You should immediately reply to a garnishment notice if you receive one to protect funds in your bank account that are exempt from seizure. It's vital to meet the deadline cited in the notice to inform the court that some of your funds are exempt, according to the FTC. Ask your bank to release your exempt funds if your account is frozen without notice. The FTC warns that you may have to settle such matters in court if your bank refuses to release the funds. A court decision in your favor would prohibit both your creditor and your bank from withholding any funds in your account that are exempt from seizure.
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