Consumer Law

How to Reduce the Risk of Banks Using Exempt Funds for Debt Payment

By M. Stan Herring

The Wall Street Journal has posted an article that discusses moves you can make to reduce the risk of your bank using exempt funds from being confiscated to pay for debt.

In an earlier article we learned that benefits such as Social Security, veteran checks, disability and pensions are not allowed to be garnished by the bank if they receive an order to freeze your account. This article suggests that if those funds are taken to pay a debt, you should notify the bank at once those are supposed to be exempt.

...contact the creditor and provide it with evidence your funds are exempt; some creditors will then tell the bank to release your account. Depending on the state, you generally have ten days to go to the courthouse and fill out a claim stating your funds are exempt.

Sometimes a debt collector can garnish someone's account even if they do not owe a debt. Summons are often sent to old addresses, if sent at all, so the person doesn't show up to court. The debt collector then gets the garnishment order.

If you receive a summons, don't ignore it: Go to court and ask the debt collector to prove you owe the debt. Often they have no proof, and the statute of limitations has expired.

If you have had problems such as these, feel free to contact us.

Full post as published by Alabama Consumer Blog on June 04, 2009 (boomark / email).