Seizures of bank accounts and bank assets may be attempted by creditors in instances where the borrower can’t keep up with the monthly debt payments. In such cases, the creditor (usually a bank or loan company) may file a motion in court requesting that they gain access to the person’s money.
While this may seem drastic, it does happen from time to time, especially when the debtor doesn’t have much in terms of tangible physical property. Seizure of a person’s assets commonly occurs in connection with bankruptcy proceedings, as well as certain types of lawsuits.
In most cases, a creditor can only go after bank accounts that are under the debtor’s name, though they can sometimes reach joint bank accounts that are held by the person’s spouse.
Under some federal and state debt laws, some bank account funds are considered “exempt” from debt collection efforts. This allows the debtor to keep some of their money so that they can at least care for their basic needs.
Though these may vary widely from state to state, some examples of exempt funds include:
- Government benefits such as unemployment insurance, veteran’s benefits, public assistance, and Social Security
- Some portion of your wages (this may vary by state)
- Child support and alimony
- Profits from sales of property that are considered exempt (such as homestead sales)
- Certain employment benefits, like retirement, worker’s comp, or disability pay
- Pension and retirement plans
- Some proceeds from student loans
- Payments from personal injury claims (again, the percentage that is exempt may vary by state)
Therefore, one of the best things to do in order to prevent seizures of bank accounts and bank assets is to create a separate account specifically for your exempt funds. This will also help you to manage your funds so that you are clear on what is exempt and what is not. It may be necessary to consult with a professional or a lawyer for advice on how to set up such accounts for exempt funds.
If your bank has received a notice of collection from your lender, the bank will usually act by “freezing” your funds that aren’t exempt. This means that you will not be able to use your account to write checks, and you won’t be able to make withdrawals from the account.
If this happens, you may wish to contact your bank to make sure that your exempt funds haven’t been frozen as well. This can happen if you have “commingled” (mixed) your exempt and non-exempt monies. When attempting to access exempt funds, you may need to provide proof and documentation, such as pay stubs, receipts, closing statements, statements from government agencies, etc.
Protecting yourself form bank account and asset seizure is very important. You may wish to hire a collection lawyer if you need assistance with your bank account funds and monies. You’ll want to take action before your assets become frozen, and you should determine which assets can be considered exempt. Your attorney will be able to assist you with these issues, and can defend your interest in court if a lawsuit arises.