Tuesday, August 3, 2010

Checking Account Garnishment

Checking Account Garnishment

If you've ever been subjected to a checking account garnishment in the past, you know firsthand that the garnishment could end up costing your more in bank fees that the debt that caused the garnishment in the first place.

The basics of garnishment are this: You don't pay a debt, so the debt collector goes after your checking account, freezes it, and seizes the debt from your accounts involuntarily. If there isn't enough money in your bank account to pay off what you owe, the creditor seizes what you have. You're angry, struggling, but you figure you're in the clear....and when you deposit more money, the collection agency seizes that too.

And Lord help you if you happen to have outstanding checks and debits that haven't cleared when the bank account freeze goes through. When those checks and debits hit the bank, the bank can't pay them due to the account freeze. Of course, the  money is still in your account at this point, but that won't stop your bank from hitting you with a non-sufficient funds fee each and every time a check or debit goes through while your account is frozen.

How thoughtful.

That checking account garnishment will cause your checks to bounce.

Checking Account Garnishment Requires a Court Judgment

Like all forms of involuntary collection, checking account garnishments must be preceded by a lawsuit and judgment. I've said it over and over and I'll say it again: If you get a summons from a collection agency, you absolutely MUST respond to prevent this from happening. 

Does responding necessarily mean you'll win the suit? No. Does it give you one hell of a better shot of protecting your money? YES. You see, a collection agency wants an easy kill in the form of a default judgment. By responding to the summons, you are demonstrating that you won't go down without a fight and many collection companies will simply back off. 

After the Court Judgment in the Collection Agency's Favor

After the company gets a judgment against you, it will begin the process of hunting down your bank account. If you've ever made a payment to a collection agency via check or bank draft rather than a money order, they've logged your account information just in case they ever need to garnish your checking account. 

So the collection agency's attorney marches down to the courthouse about a week after the final judgment is entered to pick up a certified copy of the judgment. He'll then use that certified copy of the judgment to request a writ of garnishment. If the collection agency knows where you bank, it will merely have the collection attorney forward the writ of garnishment to your bank which will promptly freeze your accounts. If it doesn't know where you bank, it will start contacting banks in your area and looking for your money. 

Now, privacy is a big deal for banks, but if an attorney calls and demonstrates to the bank that he has just cause for the bank to disclose personal information about you, it will. Don't think your bank will protect your information if you've managed to hide from the collection agency. It won't.

Banks cooperate with collection agencies

Joint Accounts and Checking Account Garnishment 

Sharing an account with another person, unless that person happens to be your spouse or long-term partner, is always a terrible idea. Unfortunately, people do it all the time. Boyfriend/girlfriend accounts, Parent/child accounts, roommate accounts, you name it. In most states, collection agencies have the right to seize half of all of the assets contained within a joint checking account.

So, lets look at the following scenario:


Mary's boyfriend Mike has bad credit and, as a result, can't seem to get a checking account of his own. Mary feels sorry for Mike as he has told her his bad credit really isn't his fault. She adds him to her bank account to help him keep his money safe. Mary currently has $5000 in her checking account. Mike promises not to keep much money in the account, just his monthly rent, which totals $800. On the 15th of each month, Mike deposits $800 into the account and pays his rent via check on the 1st. 

One of Mike's creditors, a collection agency, files a lawsuit against him. Mike ignores the lawsuit. The creditor tracks down the checking account that Mike shares with Mary and freezes it on April 7. Mike has already paid his monthly rent and has yet to deposit the next month's rent. Thus, none of his money is present in the account. 

Mary's bank account remains on hold for 21 days. Mary continues to make purchases on her debit card for an entire week before being notified that her account is frozen. During this time, 15 debits hit the bank and Mary is charged 22 NSF fees at $30 each.

After 21 days, the bank releases the account after granting the collection agency half of its contents. At this point, the bank account contains only $1840 of the original $5000. $2500 went to the collection agency while  the bank withdrew $660 in fees. 

Mike, whose money was not present in the account, lost nothing. 

Unfair? Absolutely. Common? Oh yes. At this point, Mary's only recourse is to sue Mike for the $2500 he owes her...she likely doesn't have grounds to sue him for the bank fees, but she can try. Unfortunately for Mary, a lawsuit against Mike is only fruitful if she's there to pay his debt. In addition, most individuals who suffer through this scenario won't sue because they love the person (are you getting nauseated yet?). 

Of course, when they actually do decide to sue, after the relationship has ended, often the statute of limitations on a lawsuit has expired...leaving them to learn a very hard and unpleasant lesson about relationships and money.

Even worse, some states allow checking account garnishment of an entire joint account, rather than just half. Scary, eh?


  1. Concerning this same scenario, bank acct. garnishment, but it is joint W/a spouse and the spouse has no liability to the debt and the proceeds in the acct. are SSA money? What happens
    (Mich.) and/or the remedy?? Thank you........

    1. If the money in the account is SSA money it doesn't matter whether the account is joint or not. SSA funds are exempt from garnishment from all non-government creditors. If the debt IS a government debt, that's a problem. Most states will allow the innocent party to keep half of the money in a joint checking account if that individual files an exemption request of some sort. Don't quote me on this, but I'm almost positive that Michigan is one of a handful of states that does not grant relief to the innocent spouse.

  2. When the bank takes double the amount of the judgment, how long before they have to release the difference?

  3. Writ of garnishment was filed on an old bank account of mine, I have a new one that I have used to pay several bills online. The creditor has since been given a release of writ because they no longer know where I bank. I know eventually they will find out. My question is, do they have to file a new garnishment to include my new bank information?
    ps I have since gotten married and my name has changed.

  4. Husband has outstand AMX debt and now have garnishment of joint checking acct. should I put everything in my name to protect us?

    1. That depends totally on you state. If you live in a community property state, then they can garnish either your or his checking account even if they only have a judgment against him. If you don't live in a community property state...well....technically I can't tell you "Yes, move your money into your name now!" because then I'd be an accomplice to judgment avoidance but what I can tell you is that if you DON'T live in a community property state, his creditors have no legal right to any of the money that exists in bank accounts that are in YOUR name only.