Monday, January 2, 2012

Can Collectors Garnish a Prepaid Visa Debit Card?

If you have bad credit and cannot qualify for a regular credit card, prepaid visa debit cards are a good alternative. Consumers hiding from debt collectors are sometimes hesitant to load money onto a prepaid debit card for fear that it will be garnished. Fortunately, this fear is almost always unfounded.

How Prepaid Cards Work

I know, I know, you probably already know exactly how your prepaid Visa card works but, just for kicks, lets inform those who may not.

Your prepaid Visa card looks like a credit card, but its an entirely different beast. Rather than borrowing money from a creditor and paying hefty interest charges and fees for the privilege, the prepaid card allows you to make purchases using your own money. It's just like paying with cash.

Although sometimes referred to as a debit card (I'm guilty of doing that myself), a prepaid card is as different from a debit card as it is from a credit card. When you make a purchase with a debit card, your bank immediately deducts the cost of the purchase from the bank account the debit card is connected to. A prepaid card doesn't have the same "pay as you go" freedom. You load money onto the prepaid card, use it until its empty, rinse, repeat.

To make a long story short, a Visa prepaid card is a renewable gift card to just about everywhere.

Garnishing a Prepaid Card

Collectors everywhere would love to be able to garnish your Visa prepaid card – but they can't. Their first obstacle in garnishing the card would be finding out about its existence. Unlike a credit card, your prepaid debit card does not show up on your credit report. Collection agencies can pull your credit report, but because the card does not show up on your credit record, pulling your credit report won't help them determine whether or not you have a prepaid Visa card. The only way they're going to find out about your account is if you tell them yourself, and you're not dumb enough to do that, are you? No? Good. Moving on.

Judgments and Garnishment

A collection agency can't garnish anything without a court judgment. Collectors obtain a court judgment by suing you and winning the lawsuit. Your state laws determine what and how much the collection agency can take, but collectors can generally garnish both your wages and your bank account – but they can't garnish a prepaid card.

Why Can't Debt Collectors Garnish Prepaid Debit Cards?

The very thing that makes prepaid cards so popular is what protects consumers from their seizure: the cards' novelty. Prepaid debit cards are a relatively new concept. As of right now, there simply aren't procedures in place for judgment creditors to garnish those types of accounts. In addition to instituting garnishment procedures, state laws would need to be modified before judgment creditors would have even the smallest sliver of hope of getting their hands on those funds.

Keep your money safe with a prepaid card.
What it comes down to is this: You may not be protected forever, but you're safe right now. I fully expect the collection industry to lobby hard for a way to track and garnish prepaid cards. Debtors across the country are slowly realizing that they can prevent bank account garnishment by using prepaid cards in lieu of a bank account. Creditors hate this.

If you're facing a lawsuit or already have a collection judgment against you, you probably have a laundry list of things to worry about. Fortunately, losing your prepaid Visa debit card to garnishment doesn't have to be on that list.

56 comments:

  1. I have a Green Dot prepaid Visa. Our tax refund was put directly into the card and I'm really scared that it will all be taken away from us. Are you sure We will be safe?

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    Replies
    1. As of right now a collection agency doesn't have any way to access a prepaid visa. That could always change as legislation changes, but for the time being their post-judgment collection options are limited to voluntary payment, wage garnishment, bank garnishment and property liens.

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  2. Ever hear of netspend? If you have to provide your ssn to get your green dot card, then in my opinion, you have something to worry about. My suggestion is to open another green dot card with a freind or relatives ssn that would be willing to help you out. Make sure they have good credit. It's prepaid so they have nothing to worry about if you over charge and there are no payments cause it's prepaid and you have nothing to worry about because it's not your info. As long as they are willing to help you out with there info it is perfectly legal!!! Good luck...................

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  3. I have a judgement against me (ONLY IN MY NAME) and the debt collector took money out of my joint bank account I have with my husband. Would it be wise to do a prepaid visa with my husbands ssn instead of mine? Do you think that would make it harder for the collectors to find??

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  4. I have cancelled my direct deposit at work, took my name off of a joint account, cash my check and put the money in what used to my joint account with a relative. as long as my SSN and name are not on the account they cant levy it, my relative got an extra debit card that I use, all this just in case a company that is threatening to sue me tries to levy the account the suckers wont be able to HAAHAHAHAHAHA. alway a way to beat the system

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    Replies
    1. If it is a joint account they money is still subjected to garnishment, unless it is a spousal account, in this case in the state of Pa were I live they have to sue both of you for the debt.I would still be careful about the situation in the mean while.Make sure you name is not on this account at all on any relative identifying information.Because then all the money is garnish able.Also if you own any property be careful as well such as a car or house, which they can put a lean against.My wages are not garnish able in PA, but they still tried it and money was taken from my check, but my employer refunded me the money and is rejecting the garnishment paper work sent to them from another state.Pa,texas and north and south carolina have strict garnishment laws, so protect a little better.

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  5. also why would one need good credit on an pre-paid card, there is no credit involved everything is prepaid

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  6. I have a $600 debt to a cell phone company which I got my phone from them with contract. They recently sent my account to a collection agency. I don't have (SSN) and I use debit card. Should I pay them or i will be fine if I just ignore them?

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    Replies
    1. Does a prepaid credit card company share information

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    2. They may sue you. That's their prerogative. Just because you didn't give them your SSN that doesn't mean that they can't get their hands on it. If you don't have an SSN at all, then you shouldn't have a credit report. If the debt hasn't shown up on your credit report, paying them can often prevent that from happening, provided the collection agency agrees in writing not to report the debt after you pay it.

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  7. is the american express pre paid card a safe alternative too?
    could that card be garnished as well?
    please advise.


    thanks

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  8. This is the problem with America today - people who don't pay their debts and then try to hide their assets from rightful creditors. You people make me sick! Act like an ADULT, be personally responsible for your actions and poor decisions, and pay your debts!!!

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    Replies
    1. It's not always about trying to hide assets...people just need some way to know that some of their money is safe. I am struggling to pay bills as I begin a new career and things are tight while I build clients. I have to be sure that there's a safe place for me to keep my rent money and what I need for phone, subway card, food, etc. Yes, some people may be trying to get away with theft essentially...but some of us just want to know that we aren't going to lose our homes and ability to survive.

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    2. You mean the debt caused by fraudulent charges of one's bank account?

      Or maybe the increased taxes that were forced to pay while big wigs are granted subsidies?

      Yeah, you keep paying your dues...

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    3. Yeah, I lost my job, and got $2661 behind in child support, so California put a levy on my bank account, and took every last penny when I got my first paycheck. How does one live on $0. Can't pay rent, car payment, or buy food.

      I really don't care if they felt the need to garnish part of my paycheck, but when the take everything... For $2661 in arrears... That should be a crime.. My support is set at $887/month. So I'm not that far behind.

      Perhaps some of us just try to survive.

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    4. Yeah, I lost my job, and got $2661 behind in child support, so California put a levy on my bank account, and took every last penny when I got my first paycheck. How does one live on $0. Can't pay rent, car payment, or buy food.

      I really don't care if they felt the need to garnish part of my paycheck, but when the take everything... For $2661 in arrears... That should be a crime.. My support is set at $887/month. So I'm not that far behind.

      Perhaps some of us just try to survive.

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    5. I can only pray that you fall victim to the sharks that can get away with charging insane amounts for their services. The world is full of people getting rich by screwing people over and over charging for poor service. And what can we do about it....NOTHING....we have to pay for it now or later. So you must be one of those people that enjoy taking it in the rear.

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    6. debt collector have way to much power!!!

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    7. This country sucks, but so does every other country. At least here, all they can do is take all of your money and put you on the street. In other countries, they could hang you or behead you for not paying your debts. Many years ago I learned to live on a cash basis only. No credit cards. No debit cards. No hassles. Why hand over your most intimate details to those who clearly cannot be trusted with them. Our grandparents had the right idea when they stuffed it in the mattress.

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    8. ??? prepaid cards seem alright to me as long, as they protect us from the corporate sharks. I find this a suitable defense, especially when the corporate world tends to kick people once their already down... Most people are just looking for relieve and protection. sometimes they make mistakes and are called thieves or worse, if then maybe it is a crime to be alive and to exist in such a world. which can't be the case, then it is the ceaseless debtors whom are the manipulators of such financial traps that scare the average person of maintain a bank account, when at anytime they (being the debt collectors) may come along and take well needed money at the wrong time. Honestly there should be an intervention plan where debtor and creditor can rationalize together without one or the other being in the wrong...not a court because, justice tends to be one-sided.

      anyways, to be honest whether be it escaping debt or crime or whatever be the case...it seems like to me that the prepaid card holds a future with the way things are going.

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  9. I agree, collectors have a tendency to grab everything in your account without warning and usually at a bad time like just before your rent or mortgage check is cashed, causing either that payment to be refused or lots of heavy overdraft charges for all the smaller miscellaneous debit/checkcard purchases you made. Many people are struggling for basic survival while attempting to rebuild their careers and recover from being unemployed or other financial setbacks that make it difficult to keep up with debt payments. Give people a break. I'm sure given the chance most people would pay back their debts.

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  10. Yes, what he said. Desperately looking for work.
    Ignoring bills and taxes due, because I simply do not have it.
    Taxes are mostly because of past unemployment and liquidating IRA's to stay alive.
    So apparently a court order went through...guess I missed that.

    Bank took my very last $50 towards a 100 fee for processing the court order.
    I needed that money for GAS to go a job interview.
    Christ and they did it on a Fri afternoon at close of business, and just said oh, sorry.
    Now, you want to talk about debts?
    Who did this?
    WELLS FARGO! And how much money in tax dollars were they gifted by US?
    Yes, I have always paid taxes in the past.
    Now, I'm trying to figure out how to pay my cell phone,
    Car ins. and an unrelated court fine to stay afloat till a job comes through.

    I managed to make it to the interview, borrowed some money,
    it went well, have a 3rd and hopefully final interview tomorrow.
    Last unemployment payment period is 2 weeks from now,
    trying to sell stuff online (can they garnish my Paypal account?)
    Put my car insurance to bare minimum.
    Trying to keep a roof over my head, the PGE and internet and cell phone on, and
    my drivers license to be able to work and get work, and I'm about to have a nervous break down.
    Never has it been so bad for me. God help me.
    Please pray for me that get this job, or this is nothing left for me in life.

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    Replies
    1. Wells Fargo is evil. There is no other word for that company. They tried to steal a house from me. A HOUSE. No, it wasn't foreclosure or anything of that nature. They just tried to take it. So yeah, that's a horrible bank to do business with.

      Here's the thing, most judgment holders need to file a new garnishment order each time they levy your bank account. The IRS, however, is a different beast. If you have your paychecks from your new job direct-deposited, don't be surprised to find the entire sum gone when you go to pay bills. Opening a new bank account at a different bank should buy you some time to catch up on bills before facing your next levy.

      I'm so sorry you're going through this. I've been where you are, and I remember what a dark time that was. Just about anyone whose been there will tell you that it eventually passes. It feels like forever while its happening, but it will pass. Hang in there.

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    2. CLOSE YOUR WELLS FARGO ACCT!!! Wells Fargo did the same exact thing to me! And I had 0 dollars in my account! The IRS came through, for a third time, to collect another portion of the money I owed them...even though I had 0 in my account, Wells Fargo still charged me the "legal processing fee" of $100, AND a $35 overdraft fee... : / I went in and closed my account.

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    3. FYI, Wells Fargo is the largest financier of private, for-profit prisons. The private prison companies have been lobbying to make debt a jailable offense to fill their prisons. When I found out Wells Fargo was backing this movement, that was the tipping point for me to close my account with them.

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  11. (i) If a third party makes a claim against funds on your Card, we receive notice of any lien, attachment, garnishment or other proceeding relating to you or your Card or we have reason to believe there is or may be a dispute over matters such as the ownership of your Card or your authority to withdraw funds, we may, in our sole discretion, without notice and subject to applicable law, either continue to permit Card transactions, honor the competing claim upon receipt of evidence we deem satisfactory to justify such action, freeze all or some of the Card funds until the dispute is resolved to our satisfaction, or pay the funds into an appropriate court of law for resolution.

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    Replies
    1. If you currently work for a collection agency, feel free to weigh in any time. So far, every single debt collector I've had comment here has brought valuable insight to the table. Thank you.

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  12. It's not about hiding assets Mr. Moron Anonymous the money you need for basic Necnessities ( food,rent,gas electric etc..)maybe people made poor decissions or maybe not! Maybe an ex-wife caused the leins,or you lost your Job.!It's about having money on the card not on your person.What if you lost or it was stolen your last $100.00 for food.If it is on the card you can get it back ! So dont Judge people for there misfortunes.

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    1. I don't know if people are still reading thus, but my debt was not on purpose. I was born poor and have been trying to dig myself out of an endless hole since the day I was born as soon as I am almost on the right track I get pregnant and then find out that I am a gype 1 diabetic, get deathly sick and had to spend weeks in the hospital with no health insurance, that is how I ended up in debt. In debt to the point of being overwhelmed, that is how my debt started . So now I am a mom that has to take care of her child in this cruel heartless world . All I want is for one day to not gave to worry about becoming homeless. I just want to be able to save some money for my rent, get back on my feet and then start paying my debt to stay alive back, instead of barely living paycheck to paycheck. Sorry for being poor!

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    2. As far as getting pregnant Woman have the right to choose, Fathers do not!. We have to live with your decision. That said Guess fathers never get laid off orbehing. I bet you would not mind levying your childs fathers accout for erears ....... The Family court laws in this country are biased and onesided. That said remember how it feels to try to pay rent and find your account EMPTY. No Name No Visitation.... All for mommy nothing for daddy.. Women...PFFFT

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    3. Fathers can't choose? Since when? All they need to do is keep their pants zipped or use a condom. 'nough said.

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    4. lol I agree...as a man, you know the consequences so shut it up

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  13. My husband owes Child Support arrears and we have been paying them for almost 8 years now. As a matter of fact, his daughter turns 18 in October and our "Current" payments will cease but the arrears will still be paid on. We DO NOT have a joint account for fear of a levy. My question is, is there an alternative to getting a live check every week and going to the bank and then giving me a portion so that I can deposit it into my bank and pay bills? This is exhausting. Can I get a prepaid Visa in my name and have his funds direct deposited onto this card and use it to pay bills with out the State garnishing?

    HELP! We are not trying to run from our commitment to his daughter just trying to make it here!

    ReplyDelete
    Replies
    1. Has the state ordered a standing levy? Does everything in your husband's checking account vanish as soon as its deposited? You don't mention which state you're in, but my thinking would be that you could share a joint account without fear of a levy provided you're paying the child support on time.

      You can have paychecks direct deposited to a Visa prepaid card. Unfortunately, if it comes down to getting by or paying child support, the state is going to go with the child support obligation. I'm not accusing you of trying to run from commitment, but it sounds like you're looking for a way to stop the child support temporarily and get a financial breather. If that's the issue, you can return to court and ask the judge to reduce your husband's support obligations. It's always worth a shot. If he stops paying, however, because the funds are going into a prepaid card, the court is going to hold an interrogatory and force him to disclose the existence of the prepaid card and its funds.

      If you live in a community property state, your assets could also be at risk. You really need to consult with a family law attorney before you move any further with this.

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    2. If she gives the state the imformation she is stupid If they try and force you to disclose accounts they cant find tell them to go suck eggs. They will not lock you up The states are out to make money off you not spend it!. I don't tell them anything don't call them when I move anything and wont!. Child support is not about the child its about Matching federal funds for every dollar collected and a $2.50 weekly administrative fee and interest. The only way to rid ourselves of this courupt system is to not pay the extortion to the extent that we can.STARVE the BEAST. Wait vor the custodial parent to die and go on with our lives.

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  14. I'm out of work out of unemployment, have had 3 temp jobs which helped keep us going, but temp jobs are just that, a temporary relief to an over bearing problem. I just need to buy enough time to get a full time permanent job.
    I have ALWAYS paid my bills, and paid my temp job salary in taxes before i lost my job. The last 2 years have been hell, and i hope to get out of it soon. hiding from my creditors, i guess, but not for the reasons you think. bad decisions? had my share, and paid for them. hiding from my debts to get away and avoid responsibility? Not a chance in hell, they will get paid when i get back on my feet, and just so you know, i tried getting help from the government, but they don't help people trying to help themselves, no matter what i paid in before in taxes. Think before you speak, some of us are just trying to survive and will take care of our debts when we are back on our feet and our families are fed and safe.

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  15. My child support payment is garnished from my paycheck, but I owe arrears. Wells Fargo is charging me $125 every time my acct is levyed, which has been every 3 months, to tell DCSS there are no funds available. That is like throwing $500 a yr in the trash!! Money I could spend on my kids! Can this happen with a prepaid card??

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    Replies
    1. Here's the problem, some states require that you allow child support to be either directly debited to your account or that you pay the agency directly and it will direct the funds to where they need to go. In situations like that, you could pay the child's custodial parent yourself, but the court system needs a paper trail. So no, they probably wouldn't go for the prepaid card thing.

      Oh, and those fees Wells Fargo is charging are completely ridiculous. Go get yourself a new checking account somewhere else. Soon Wells Fargo will submit your name to Chexsystems and you won't be able to open a new account elsewhere, so switch banks pronto!

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    2. NEVER pay support for a child unless you go through the support collection unit!. The custodial parent could pull you into court and say you did not pay the support any CASH GIVEN is CONCIDERED A GIFT and will not count period for current nor erears. Bein there done that!. NEVER ......

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    3. Anything paid OUTSIDE of paying it to the State Disbursing Unit is considered a "gift" and does not count towards the child support order/arrears. No amount of paper trail to the custodial parent will matter. You can usually apply for a bank suppression through the child support agency to defer a levy every few months as long as your initial ORDER is made in full (compliance is the first step). Make sure that your current order includes some fort of arrears payment (ie. your child support order is $200 child support + $200 in childcare + $50 in arrears).

      People pay their child support, but LIFE HAPPENS. People get laid off, but your current order is still due regardless whether you can pay it or not. My husband's order was set $300 higher than what he could ACTUALLY PAY, but the judge didn't care. CA will make an order from 50%-up to 65% of your GROSS. Child support is quick to raise an order, but they hold out on lowering an order. Child support is also taxed MONTHLY & YEARLY, so even if you fell behind you're scrambling to pay off the interest.

      Above is the prime example why one should have cash on hand in a safe at home or on a VISA gift card. They do make ones with Name + address + 16 card number + CCV. It's called survival and self preservation.

      Child support also RELIES on pulling in orders, not for the "best interest of the child", but for themselves. Administrative costs is the number ONE priority, not to trickle down to the mother. They get matched dollar for dollar = the more they pull in the more they get PAID.

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    ReplyDelete
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  20. Your Social Security number is required to get the prepaid cards according to the US Patriot Act but it doesn't mean you will get garnished from your prepaid card. Prepaid cards are not checking accounts or do you own a checking account. As of US Law today Creditors can not garnish your prepaid cards. If they attempt to find out you do have a prepaid card, they can't garnish it because the bank that issues the prepaid cards will tell them you don't own a bank account with them which in turn THEY CAN NOT GARNISH YOU. You do not have a banking relationship with them except for the prepaid services.

    I would stay away from US Bank's prepaid services since those prepaid cards can garnish you.

    Use a Walmart Prepaid card or greendot cards. They won't know you have one since you have no record of having a checking account with them since its not a bank account.

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  21. I have a question.. I racked up a pretty good chunk of debt that is still owed to U.S. Bank about 2 years ago. I never did pay them and I'm certain they sued me and got a court ordered garnishment. Never filed bankruptcy. My question is this.. I got a ReliaCard through U.S. Bank from the State of Nebraska for unemployment benefits. It is a prepaid visa debit card. Is there anyway that it could be garnished? I've heard prepaid debit cards are safe from garnishment but being U.S. Bank worries me.

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    Replies
    1. I just finished an interview with a company and it looks like they will hire me...BUT, they want me to brings in a voided check when I fill out the employee package in a couple of days. I have no checking account, and have been using prepaid visa for the past couple of years. Tried to open a checking account yesterday and was rejected due to an old account I owe money on. Now wondering if the company will accept my visa prepaid as a means for direct deposit. Let's say they do. Will a red flag be alerted for bill collectors to garnish wages off my prepaid card?

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    2. No. Unemployment benefits are exempt from garnishment. I am in the exact same situation as you, however am unemployed from 10 years in the collection agency so I am familiar with the process. I have a debt with US Bank and receive WI Unemployment on the Reliacard. And No they cannot and will not take it.

      Good luck to you.

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  22. Can the IRS levy a prepaid card?

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  23. For those who have posted about child support levies in the state of California, if your court ordered arrears payment is being garnished from your paycheck the first $3500 in your bank account is exempt from seizure. It's in your best interest to ensure that a wage garnishment is always up to date otherwise the banks will rob you blind several times a year and you'll rack up hundreds in levy fees and overdraft fees. They don't give a damn if you can eat or if you have a roof over your head or even if you can afford the gas to get to work. The entire system is ridiculously one sided and cruel. There are many like me who don't duck their responsibilities, don't dispute the amount owed and have every intention of paying every penny of interest and arrears, who are nevertheless put through hell by a collections process that is punitive and cruel.

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  24. In Nebraska can child support received be garnished ? Us bank Reliacard funds -are they protected? We are just trying to keep roof over our heads & I owe on judgements & overdue child support. I'm so scared to end up homeless because of legal binding debt

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  25. I'm not sure if youre asking if a collection agency can garnish child support itself or if you can be garnished for child support but, to the best of my knowledge, NO state will let a collector knowingly garnish child support payments or levy child support from your bank account. The best I can tell, however, once a court orders child support in Nebraska, that comes with an automatic garnishment order to ensure the child support is paid. Back child support is no joke, and the state will come after you with all they've got to collect it.

    As far as Reliacard is concerned, one of their primary features is linking up with government agencies to provide automatic payments so, and don't quote me on this, but it seems like the Reliacard would be less secure than most standard prepaid cards. Because its so new, I really have no experience with the Reliacard so I couldn't say for certain.

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  26. I had my Tax return Garnished and it was supposed to be directly deposited to my pre paid card, the truth is your tax return can be taken, all of mine was because what they do is inform the IRS that you owe and they allow it, so the money never hits the prepaid card. I wish the best of luck to you.

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    Replies
    1. This was a Visa prepaid card? This is news to me. I figured it would happen sooner or later, and if its begun I need to update this post to reflect the new practice.

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    2. I'm confused. Prior to releasing money, the IRS check to see if you owe them money. If you do and you receive a refund, they will take the money. Was the money on the card and IRS took it off the card?

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    3. Actually it sounds like the refund itself was garnished so it never was deposited by the treasury.

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