Can Creditors Go After My Bank Accounts?
By Erica Sandberg
December 4, 2012
I was out of work for more than a year. I was paying my credit cards, but I stopped because I did not have the money, and I still don’t. One creditor put a judgment against me and they told me that if I had any bank accounts, they could freeze them. Is that true? And can I do anything? — Charrise
I wish you would have contacted me earlier! We may have been able to offset the lawsuit that happened. After all, before the creditor could take such action as freezing your bank account, it had to first sue you in a court of law, and then win the case.
How the judgment creditor is permitted to collect after winning depends on the state you live in and what the judge permitted. Sadly, the amount that you owe today is probably much higher than what it was before they served you with papers. Lawyers’ fees and court costs have surely been added to the balance.
Assuming the judgment creditor has been granted the right to freeze and seize assets in your bank accounts, that’s what it will do. Of course, if there was some mistake and the funds are protected after all (for example, certain retirement savings and government benefits such as Social Security), you can dispute that with the courts. However, if the funds in your account are nonexempt, your creditor will be able to take what’s due. And that’s sensible, because, if you have the money to pay, you ought to.
Essentially, Charrise, you have three ways of dealing with a judgment. Here they are:
- Pay it. Can you borrow the money from someone and then satisfy the debt? That way you’ll get it out of your hair and won’t have to worry about what your creditor can legally take from you. It sounds like you’re working now, and it’s possible that your wages are subject to garnishment. However, having a portion of your pay automatically siphoned to the creditor is a way to pay it off, too. You may be able to send more and pay it down faster by budgeting your expenses.
- Ignore it. This is typically not the best way to deal with a judgment because it can stick around for a very long time. Depending on your state, a judgment creditor can have decades to collect. Still, if you have nothing that a creditor can claim or garnish, there is nothing that can be done to you. In other words, it’s possible to wait it out.
- Discharge it in bankruptcy. Judgments for credit card bills are considered unsecured debt and, if you qualify, you can be formally absolved of them in bankruptcy court. Discharging your debt can give you a fresh financial start. Bankruptcy is a very serious decision, though, so make sure it’s the right action for you.
Now, let’s get back to the reason I wish you’d contacted me earlier.
If you can’t pay your bills, it’s always a good idea to talk to the creditor and attempt to work something out. Even if you’re out of work, there are ways of keeping the matter out of court. Perhaps you can sell property and apply the proceeds to the balance. Or you might be able to scrounge enough to offer a debt settlement. At the very least, you can make good faith payments of as much as you can afford. It may not be enough to stop a lawsuit, but the judge would see that you’ve made an effort. That alone can influence the judge to look kindly upon you. You might even get a stipulated judgment, meaning you would to continue to send small amounts to the creditor and not have the judgment entered unless you stopped paying.
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