Can Debt Collectors Call Your Boss?

No one wants to look bad in front of the boss--and there are few things as embarrassing as having your boss discover that, not only do you have bad debts, but that debt collectors are so focused on recovering them that they're willing to call you at work. Sure, a debt collector can't just call up your boss and say, "I'm Dave from XYZ Collection Agency and your employee, Gina, owes us $3,000. Just thought you'd like to know." But the fact that a debt collector can't openly disclose your debt to your boss doesn't mean that your employer won't find out indirectly.

From a legal standpoint yes, a debt collector can call your boss, but only in its search for you. The collector may identify himself on the phone, but he cannot volunteer information about the company he works for--unless your boss asks for it. If your boss wants to know just who it is on the phone looking for you, the collector will disclose the name of his/her employer. Now that may be all fine and good if the collection agency's name is something elusive, like XYZ Corporation, but if its XYZ Collections or XYZ Acquisitions, it doesn't take a rocket scientist to make the leap from "A collection agency wants information about my employee" to "My employee must owe the collection agency a debt."

Collectors may call your boss.

Although your boss might be a big enough idiot not to put two and two together, its highly unlikely.

If the collection agency knows where you live and work, it no longer has a legal reason to call your boss directly, but the company will still try to call you. If a debt collector finds your work number, you can rest assured that you'll receive a barrage of collection calls throughout the day--especially if those calls frustrate you. The reasoning is simple: Once you're frustrated enough you'll agree to make a payment on the debt just to make the calls stop. This is particularly beneficial for the collector if the statute of limitations on your debt has expired. By making a payment, you once again make yourself vulnerable for a lawsuit.

Your boss will likely take notice if you start receiving a much higher-than-normal volume of personal calls at work and look into the matter. You don't want that to happen. The name of the game is keeping the boss in the dark when it comes to your personal business--and collection calls are very, very personal business.

How to Stop Collection Calls at Work

The FDCPA prohibits debt collectors from calling you at any time or place they know to be inconvenient for you. It also makes a special allowance for collection calls at work.

a debt collector may not communicate with a consumer in connection with the collection of any debt --..
at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication.

This means that all you have to do to stop collectors from calling you at work is to tell them that you are not allowed to take personal calls at work and that calling you at work is an inconvenience. Most collection agencies train their collectors to adhere to the FDCPA in order to avoid FDCPA-violation lawsuits.

Unfortunately, sometimes verbal communication doesn't go over very well with debt collectors. Unscrupulous third-party debt buyers may ignore your requests not to call you at work. This may be due to ignorance of the law, but whatever the reason, you can cover yourself and ensure a paper trail exists by notifying the collection agency in writing that you cannot receive collection calls at work. Send the notice Certified Mail, Return Receipt Requested and keep the return card. This provides you with proof that the collection agency received the request if the harassing calls at work continue and you're forced to take legal action.

Debt Collectors Can Inform Your Boss About Your Debt After a Judgment

If a collection agency sues you and you don't show up in court with a defense, the court grants the collection agency a judgment against you by default. State laws vary, but a court judgment generally gives the collector the right to seize your assets. One common method creditors use to collect judgments is wage garnishment.

If a collection agency decides to garnish your wages, it no longer has to hide your debt's existence from your boss. The collector will serve your employer with a writ of garnishment or writ of execution, depending on your state. Your employer must then direct a portion of your paycheck to the judgment holder until the debt is either paid off, the judgment expires or you quit your job. As embarrassing as it may be for your boss to know that you are under a garnishment order due to an unpaid debt, your employer cannot fire you based on the garnishment alone. Strangely enough, your employer can fire you if you receive a second garnishment order. The moral of the story? if a collection agency is tailing you, tread carefully and act fast to keep your job stable and your boss oblivious.

Related Posts:

Can Bill Collectors Call Your Family?

What Happens If a Collection Agency Sues You and Wins?

Debt Collection Lawsuit Statute of Limitations By State

Q&A: Will Collection Agency Lien a Mobile Home?

Mr. Edwards,

I have a rather complicated situation, but your blog postings have provided me with a wealth of information, and I value your judgment.  I hope you can answer a couple questions for me.

The scenario in brief:  My sister and husband had unsecured debts originating in 2011 or prior.  Their only income is minimal Social Security and a paid-for 2006 mobile home in a park (no land) in Pennsylvania.  My 84-year old brother-in-law became incapacited with dementia and a permanent resident of a nursing home in December 2012.  Unable to continue paying the 3 debts, my sister originally contracted with a ‘debt relief’ firm and tried to pay them for about 8 months, before becoming unable to pay due to my brother-in-law’s medical and nursing home costs.  Late last year my sister put the mobile home up for sale (value about $39,000) and I moved them to be near me in Colorado.  She is in a low-income apartment and he is in a nursing facility here, and I am handling their business and finances. The mobile home is in joint ownership.  The collection letters are addressed only to my brother-in-law, but I don’t know if they jointly signed for the original debt or not. 

The question: The debt relief contract staved off the debt collectors for that time but my brother-in-law has received 2 notices from Viking Client Services (Minnesota) collection agency  for one of the uppaid debts in the amount of $16,000.  I am uncertain if I should inform the collection agency of their situation because I fear it will push them to file for a judgment and lien against the mobile home, making it even more difficult to sell; or just let them continue to make collection attempts and see if they go as far as trying to lien the property.  What would you suggest?

I would greatly appreciate any advice you can provide that might assist me in handling this and not making it worse. 

Thank you,

Sherry

Sherry,

From my standpoint, your relatives seem to be in pretty good shape as far as collections are concerned. Yes, I'm sure you're sitting there aghast that I just said that, but hear me out. Their only income is Social Security. When traditional collection methods fail, collectors sue. Once they have their judgments in hand, they immediately begin garnishing the debtor's pay and bank accounts. Unless, of course, the only funds the debtor has are exempt. So the debt collectors can whine and cry and wheel and deal and threaten all they like. As my grandmother used to say, "Can't get blood outta no turnip, boy." Personally, I'm surprised they kept paying as long as they did. 

Now, if they own that mobile home a debt collector could conceivably place a lien on it--but that's highly unlikely. Highly. I worked in real estate for a few years (still do occasionally, if the contract's good enough) and I can tell you: there is nothing on this earth harder to sell than a mobile home. What would happen is that the collection agency would spend all this money on legal fees to take your family to court and for what? Non-garnishable income and a mobile home that would sit there and accrue property taxes because the collection agency couldn't sell it? Sure they could, but it takes more time and money and patience to seize and sell a mobile home than a traditional home or car. Collectors are all about the bottom line. Patience just isn't that industry's strong suit. 

And to add fuel to this fire of madness, the mobile home is jointly owned. Since its located in Pennsylvania and Pennsylvania isn't a community property state, the collection agency would only be entitled to half of the proceeds from the home sale--making seizing this property a lot less appealing than it was originally.

So, here is my opinion and just my opinion: If it were me, I would waste no time in letting the collectors know that my family members were both on Social Security and that it is their sole income. I would also inform the collectors that one is in a nursing facility and the other is living with a friend. This tells the debt collectors three things right off the bat: 

1. They have no paychecks to garnish.

2. It's illegal to hit them with a bank levy. 

3. They have no property to seize. 

I wouldn't lie. I would just omit the fact that they owned property in another state. You are under NO obligation to give a collection agency information that it needs in order to pursue your elderly family members. Your family members aren't completely judgment-proof, but they are enough so that letting a collector know these three things should get their debt written off the books. If they sue and take the mobile home, they sue and take the mobile home. At this point we have to just count on the smart business sense of the agency and your ability to make it clear that your family members are on Social Security and both are currently living in rental situations. 

I genuinely don't feel these debts are a threat. I don't. The debt collectors will keep calling (because that's what they do) and you keep telling them the same thing (or stop answering the phone) and as soon as the statute of limitations for lawsuits expires, hit them with a cease and desist order. Boom. Problem Solved. 

Best of luck,

Lee 

Related Posts:

Can a Collection Agency Put a Lien on Your House or Car?

Statute of Limitations for a Collection Agency Judgment Lien 

Make Yourself Judgment-Proof

Can a Collection Agency Freeze Your Bank Account?

The short answer is yes, a collection agency can freeze your bank account--but only under certain circumstances. If you've got bill collectors on your heels threatening to levy your bank account, its a good idea to familiarize yourself with when and how your bank will institute an account freeze and what you can do to have the account released after the freeze occurs. This is assuming, of course, that your frozen bank account contains exempt funds.

How Debt Collectors Freeze Bank Accounts

A collection agency can't simply call up your bank and demand that it freeze your accounts. A freeze can only occur after the collector obtains a judgment. If you live in a state that allows private creditors to place a hold on your bank accounts (and to the best of my knowledge, Delaware is the only state that does not permit the practice) the collection agency serves the judgment paperwork--generally a writ of execution, but the correct procedure will vary by state--on your bank. The bank must then freeze the funds in your account for a period of time ranging from 10 to 20 days. During this time, you have the right to contest the freeze and attempt to have it lifted. After the freeze period expires, the collection agency levies the amount you owe (or the entire balance, if its less than what you owe) from your bank account.

Read More: Checking Account Garnishment

Bank Account Freeze and Garnishment Exemptions

State laws vary wildly when it comes to releasing frozen bank accounts. One rule of thumb here, however, is that if you have exempt funds in your bank account, you have to notify the collector and the bank. A collection agency cannot legally levy funds it knows to be exempt. The following forms of income are exempt from seizure by collection agencies:

• Social Security
• Veterans' benefits
• Unemployment
• Child support
• Federal employee retirement benefits
• Railroad retirement benefits
• Welfare benefits

There are exceptions to this rule. If the collection agency is working to collect a government debt, such as unpaid taxes, student loans or child support, it may seize exempt funds from your bank account. 

Read More: Student Loan Collection 

How to Release a Bank Account Frozen By Collectors

New federal regulations require banks to examine accounts and automatically exempt any federal benefits or other exempt payments from the freeze and subsequent garnishment. That doesn't mean that the system works perfectly. In some cases, its up to you to ensure that your bank doesn't hand over your exempt income to a collector with a judgment. Most states require banks to notify you of an account freeze and give you instructions for contesting the freeze before allowing a debt collector to levy the account.

In some cases, its up to you to prove that the frozen funds in your bank account are, in fact, exempt from garnishment. You can generally request exemption forms from the bank. By claiming your exemptions and providing both the bank and the collection agency a copy, you are notifying them that they cannot legally take your money. If the collector chooses to levy your account anyway, the fact that you previously notified them that the money was exempt gives you leverage to go to court and fight to have your exempt funds returned. 

The OCC has a rather thorough FAQ regarding bank account freezes and garnishment that may help some in this situation. You can find it here: OCC FAQ

Frozen Non-Exempt Bank Accounts

Unprotected funds in your bank account that may be frozen include tax returns, paychecks, savings, gifted money, etc. If the collection agency knows where you bank, it could freeze your bank account and seize these forms of income at any given time after winning a judgment against you. 

Can Debt Collectors Seize and Garnish a Paypal Account?

If you're worried about a collection agency garnishing your Paypal account, then I probably don't need to explain the lawsuit and garnishment process to you in detail. In a nutshell, if a debt collector sues you and gets a judgment against you, the company can then go after your assets, seizing them in lieu of payment. Paypal isn't a bank, but that doesn't mean your Paypal money is safe from a collection agency's judgment.

Lawsuits and Garnishment

If you could pay, you would have done so

Collection agencies don't sue you with the hope that the summons will make you throw your hands up into the air and say, "Okay, okay. You win. I'll pay you now." If you were able to pay, you probably would have done so long before the case went to court. No, a collection agency sues you with the intention of seizing your assets. If its lucky, the collector will walk away with far more in interest, fees and court costs than it would have gotten if you paid the original debt to begin with.

You also probably know that collection agencies can garnish your wages, levy your bank accounts and put liens on your property – but just because these are the most well-known ways that collectors force you to pay off a judgment, that doesn't mean they are the only ways.

Garnishing Paypal

Just because you don't hear about collection agencies garnishing debtors' Paypal accounts very often, that doesn't mean it can't happen. Paypal funds are monetary assets, plain and simple, and if a judgment creditor knows about those assets, you can bet the ranch that it will pursue them to the full extent of the law.

The reason you never hear about collection agencies garnishing Paypal accounts is that, more often than not, the collection agency has no idea that the Paypal account even exists. The same principle exists here that exists with prepaid debit cards – if the debt collector doesn't know about it, it doesn't try to seize it.

How Debt Collectors Find Your Paypal Account 

After winning a judgment against you, the collection agency may request that the judge force you to return to court for something known as a "post-judgment interrogatory." During the post-judgment interrogatory, the collection agency's attorney asks you questions about your assets. If you don't show up for the post-judgment interrogatory, refuse to answer the attorney's questions or lie about your assets, you can be held in contempt of court. Not fun.

Where are the assets?

The collection agency's goal here is to find out where you've socked away all your assets so that it can seize them. The collector's attorney can force you to disclose bank account and employment information and information about any property you own. But the attorney can't force you to volunteer information. Your best bet in a post-judgment interrogatory is to answer the questions you are asked in the simplest way possible while still satisfying the requirements. In other words, don't volunteer that you have a Paypal account if the collection agency's attorney doesn't ask you about it.

Why Collection Attorneys May Not Ask About Your Paypal

My theory as to why collectors rarely find out about judgment debtors' Paypal accounts is that collection agencies are cheaper than Mr. Krabs. Because of this, they have a tendency to hire cheap attorneys fresh out of law school that didn't do well enough in the program to be offered a better job somewhere else when they graduated. If a collection agency is working with an inexperienced (and perhaps not too bright) attorney, it may not even occur to the attorney to ask the right questions.

Some collection agencies that have older, more experienced attorneys on staff to oversee the fresh meat. But old habits are hard to break, and if a lawyer has attended hundreds of post-judgment interrogatories and asked the same questions at each one, its a fair bet that he's going to continue to ask the same questions. If he didn't think to ask about Paypal 10 years ago, odds are he won't now either.

Lying to Collectors About Your Paypal Account

Just because lying at a post-judgment interrogatory could result in a debtor being held in contempt of court, that doesn't mean that there aren't debtors out there who do just that. I'm not advocating illegal behavior, but I should warn you that lying about the existence of your Paypal account doesn't guarantee that you can protect it.

If a judgment creditor requests bank statements from your bank, your bank can do one of two things: hand over the statements without question simply because the creditor has a judgment (and is probably already levying your account) or refuse to comply until the debt collector comes back with a court order. Odds are the collection agency isn't going to bother to go get a court order just to check your bank statements, but if your bank hands over those statements and you lied about your Paypal account, you could find yourself in legal  hot water.

Don't lie about your Paypal

In order to be verified, Paypal accounts must be linked to a bank account or credit card. If your Paypal account is linked to a bank account and you regularly transfer funds from your Paypal to your bank, those transfers are going to show up on your bank statements and the collection agency is going to want to know where these transfers are coming from. If the bank is willing to pony up that information or if the statements themselves show that the transfers are Paypal transfers (some do, some don't), you're busted.

Protecting Your Paypal From Collectors

You are strictly prohibited from transferring assets to another person to keep them out of your creditors' hands. But Paypal gives you the option to request a check for the amount present in your account. Transferring the money to your bank account and then trying to withdraw it is risky. If you have a levy on your account or if the collection agency places a levy on your account after you initiate the Paypal transfer but before the money arrives, your Paypal funds are gone, gone, gone.

This isn't to say that if the collection agency finds out that you cleaned out your Paypal account before it could get there that it won't claim you were trying to hide assets. The odds of the debt collector going back to court to throw a fit about this in front of a judge is small, since that would require time, effort and money on behalf of the collection agency and the collector would have to prove that you intended to hide the money. Regardless, be aware of the risks of anything before you do it.

Paypal Could Freeze Your Account

One last thing to be aware of: Paypal could freeze your account. I read a quote somewhere that resonated so much with me that I'd like to mention it:

Paypal can put your  money on lockdown

"Paypal works great until it doesn't."

Those of you who have lost money and struggled mercilessly with Paypal after an account freeze know exactly what I'm talking about. Paypal can place a hold on your funds anytime for any reason. There is no guarantee that Paypal wouldn't be willing to do just that if the collection agency contacted it and requested that it do so pending a garnishment.

What it all boils down to is that I hate to see people lose everything to a garnishment, but I also don't want to see any of you guys end up in legal trouble just trying to protect money that's rightfully yours. You can't know what a collection agency is planning and lawsuit threats are often just that – empty threats – but to avoid potential legal problems down the road its always best to do what you have to do before the collection agency files its lawsuit and tries to garnish your Paypal account.

Related Posts:

Can Collectors Garnish a Prepaid Visa Debit Card?

Funds Exempt From Bank Account Garnishment

How to Respond to a Bill Collector's Lawsuit

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.

Can Collection Agency Take My Tax Refund?

If you're one of the many lucky Americans who receive a tax refund at the end of the year, the last thing you want to have to worry about is having your refund snatched away from you by bill collectors. Unfortunately, if you owe debt to a collection agency and the collection agency has a judgment against you, losing your tax refund is a very real possibility. If you know your tax refund is at risk of being seized, there are steps you can take to protect your money and prevent collectors from garnishing your federal and state tax refund money.

Tax Refunds Exempt From Garnishment

Collection agencies love garnishment because it provides them with a way to recover unpaid debts without having to rely on the debtor to send in a payment each month. Garnishment ensures that payments arrive on time each and every month until the debt is paid in full.

Certain types of income, such as disability, unemployment, child support, etc. are all exempt for collection purposes. Collection agencies can neither garnish these or levy them directly from your bank account. Your tax refund is a special case, however. While debt collectors cannot garnish your tax refund from the IRS before its sent your way, once you deposit it into your bank account it becomes fair game for judgment creditors to seize.

Government Debt Collection

I can't bring up tax refunds and claim that creditors cannot garnish them when there is one glaring exception to this rule – the government. If you owe back taxes or unpaid student loans, rest assured your tax refund will either be garnished or withheld in its entirety.

You see, its entirely too much trouble for the IRS to work with commercial creditors in order to facilitate garnishment of tax refund money. Your right to your full tax refund, even if a creditor holds a judgment against you, isn't a way for the government to ensure that you have the money you need. It's merely inconvenient for the IRS to permit creditors to garnish tax refunds before they are sent out.

How do I know this? All other forms of income that are exempt from garnishment are exempt due to a special status as a "benefit" (usually, but not always, a federal one). These benefits are exempt from both types of garnishment. Your tax refund is not a benefit of any sort. It's your money. It was always your money. You just used it to pay your taxes. It's no more exempt from seizure than money you receive when you return an item to a department store.

Protecting Your Tax Refund From Seizure

Because debt collectors cannot garnish your tax refund directly from the IRS, you should receive your full refund. Provided you cash your refund rather than depositing it into your bank account, debt collectors – even those with a judgment against you – will not be able to touch it.

Get your tax refund on a pre-paid Visa card.

One thing to remember: If you are e-filing, request that the IRS mail you your refund via a check or prepaid Visa card (yes, they do that. Cool, huh?) rather than using direct deposit to deposit the money into your checking or savings account. While direct deposit is much faster than getting your refund through the mail, its also much safer and less stressful than waiting with baited breath for your refund to clear before racing to the bank to withdraw it before the collection agency can freeze your bank account.


Related Posts:

Funds Exempt From Bank Account Garnishment

Make Yourself Judgment Proof

Checking Account Garnishment

Make Yourself Judgment Proof

Judgment proof debtors have a clear advantage over those who aren't – if and when a collection agency sues, judgment proof individuals do not need to worry about losing assets to an unscrupulous debt collector. Rather than helping the collection agency make money, a lawsuit against a judgment proof consumer often serves only to increase the collection agency's losses.

Photo by Purpleslog

Who Is Judgment Proof?

A judgment proof individual is anyone's who assets are fully exempt from collection. First, lets discuss the additional collection rights debt collectors earn after suing you and getting a judgment:

• Can garnish your wages
• Can garnish your bank accounts
• Can place a lien against your real estate
• Can place a lien against your personal property, such as an automobile

Keep in mind that collection agencies working for the federal government have these rights without the benefit of a judgment. Commercial collection agencies whose responsibility it is to collect old hosptial debts, library fines, credit card debts, etc, must have a judgment against you before utilizing any form of involuntary debt collection.   

Most people that hold judgment proof status in one area aren't safe in another. For example, if you are unemployed, a collection agency cannot garnish your wages because you don't have any. If you have a car, however, the company can place a lien against it and subsequently seize the vehicle. 

Judgment Exemptions That Protect You

You don't have to lack any assets at all to be considered judgment proof for legal purposes. Some forms of income are protected under federal law. Thus, if you survive primarily on one or a combination of the following income sources, collection agencies cannot force you to turn over the funds either via garnishment or a bank levy. 

• Social Security
• Child support
• Unemployment
• Veterans' benefits
• Unemployment payments
• Military annuities
• Financial aid for college
• Workers' compensation
• FEMA benefits
• Retirement pensions
• Alimony

Remember, when it comes to bank account garnishment, you must claim your exemptions for them to be effective. Otherwise, the collection agency will try to seize them and the bank will willingly turn them over. 

Make Yourself Judgment Proof

While defending yourself in court against a collection agency lawsuit is always the smartest course of action, there are things you can do to reduce the odds of the collection agency being able to enforce a judgment against you and, in some cases, helps prevent a judgment altogether. 

Your wages are the most difficult piece of the puzzle. If you live on standard employment and don't work "under the table" or live primarily on government or retirement benefits, your wages are usually subject to garnishment. There isn't too much you can do about this unless you want to change employers frequently until the judgment expires. It typically takes debt collectors six months or so to locate you and file a new garnishment order. Some don't even bother. Thus, whether or not you are fully exempt from wage garnishment is more a matter of sheer luck than careful planning.  Unless, of course, you're willing to relocate. 

Four U.S. states do not allow wage garnishment by commercial creditors – including collection agencies. Those states are South Carolina, North Carolina, Pennsylvania and Texas. 

If you live in the northern U.S., purchasing property in Canada, filing for permanent residency (roughly $1500 last I checked) and getting a job across the border can prevent a collection agency from garnishing your wages. 

Protecting Bank Accounts From Judgments

Your bank accounts are safe if they contain exempt funds and you take care to claim those funds as exempt with your bank as soon as the collection agency tries to place a post-judgment freeze on your checking or savings accounts. Otherwise, a bit of creativity may be in order. 

Many banks overseas offer foreign bank accounts in U.S. dollars. Lloyds of London is just one example. You can use the bank for all of your checking and savings needs with the security of knowing that a collection agency can't touch your money. 

Let me be straight here: If you owe the IRS, putting your money into an offshore checking account doesn't help you. The IRS has options other collectors don't and doesn't even have to sue you before taking away everything you own. Collection agencies, however, would have to "domesticate" their judgments to collect from an offshore account. Few collection agencies would bother going through this trouble – and that's if they even find out about your offshore account. They have enough trouble tracking down bank accounts in the U.S. 

Keep in mind, I'm not telling you how to hide your bank accounts from collection agencies since that could potentially get me in trouble. I'm merely stating a method by which some people do just that. 

Collection Agency Liens Against Real Estate

If you own your home home, you'r at risk of liens after a judgment. Hiding assets after a judgment is illegal in most states, but taking care to place your assets in safer hands prior to the lawsuit isn't. If your house or car is paid for, a collection agency is  more likely to foreclose on its lien. If you carry a mortgage or auto loan, the collection agency would have to pay off the superior lien before it could seize the asset. Thus, its generally safer to keep a mortgage against your property. 

Renters benefit greatly here. Debt collectors cannot place liens against rental property if the judgment they hold is against the renter rather than the property owner. Yet another aspect of the lien process to consider is that the lien appears in the county you live in. The collection agency may very well overlook property you own in other counties or states. 

Related Posts

Can a Collection Agency Take My House?

How Collection Agency Debt Can Turn Into a Default Judgment

The Debt Collection Lawsuit Threat

Funds Exempt From Bank Account Garnishment

Its an all-too-common scenario: A consumer goes to pull money out of the ATM, buy groceries or pay for dinner and lo-and-behold! His card is no longer authorized. 

Did the bank make a mistake? Has he been robbed via identity theft? No, he's just another victim of the mandatory checking account freeze prior to bank account garnishment by a collection agency.

Funds Exempt From Bank Garnishment 

When your bank receives notice from a collection agency that it has a writ of garnishment in hand and intends to garnish your bank accounts, it will freeze your accounts and notify you of the garnishment after the freeze is securely in place. This prevents you from immediately moving your money to a safer place (which everyone with any sense would promptly do, given half a chance). 

Then again...your bank doesn't have the right to freeze everything. Your bank must release the following forms of income immediately:

• Child support
• Military annuities
• Social Security
• Retirement benefits
• Survivor's benefits
• Unemployment pay
• Public assistance
• Alimony
• Workers' Compensation

Bank Account Garnishment Exemption Claims 

Don't think that your bank will be kind enough to look into your deposit records and determine for itself how much of your money is exempt from garnishment. No, its up to you to inform your bank of your exemptions, prove your case, and push the issue until your bank releases the funds. The U.S. Department of the Treasury clearly states that a bank cannot turn exempt funds over to a collection agency if the consumer has filed an exemption. 

Will your bank be kind enough to immediately mail you an exemption form? Maybe, but probably not. If you know you have funds that are exempt from garnishment within your bank account, be prepared to visit the bank in person, armed with copies of your checks and your deposit records to ensure that you can claim your exemptions and protect your bank account from seizure. 

How Collection Agency Debt Can Turn Into a Default Judgment

How Collection Agency Debt Can Turn Into a Default Judgment

Collection agency debt, if ignored for long enough, can become a default judgment that haunts your credit report for far longer than a mere collection account. While this doesn't mean you should necessarily make arrangements to pay the collection agency (since that can rest the debt collection statute of limitations and be dangerous) you should be aware of how default judgments occur so that you can successfully avoid one.

What Is a Default Judgment?

A default judgment occurs when a debt collector files a lawsuit against you for refusing to pay the debt it claims that you owe. When it files a lawsuit, it is legally required to serve you with a court summons notifying you of the impending lawsuit so that you can appear and defend yourself. If you don't appear at the hearing, the judge will enter a judgment in favor of the collection agency by default. This is known as a "default judgment."

If you don't defend yourself, the judge will rule against you.

Collection agencies like default judgments because they prevent the company from having to actually hire representation and appear in court itself. That's right, nine times out of ten all the company does is submit paperwork to the court and sit back and wait for the default judgment to come rolling in. 

Unless your state's laws require that you be personally served with a court summons should anyone attempt to sue you, you can rest assured that the collection agency will do everything it possibly can to ensure that you never realize that a lawsuit is underway. This usually includes such tactics as:

• Sending the court summons to an address you've never lived at.
• Sending the court summon to your old address
• Not sending a court summons at all

How a Default Judgment Hurts You

A default judgment shows up on your credit report. Although the FCRA states that a judgment remains on a consumer's credit record for seven years, this only applies in cases where the state's laws only allow creditors to enforce the judgment for seven years or less. If your state's laws allows a judgment creditor to enforce a judgment for, say, 10 years before that judgment expires, it will remain on your credit report for the full 10 year period. Renewals have no impact on the reporting period. 

Not only will a default judgment probably cost you well over 100 credit points, depending on what your credit score was to begin with, it gives the collection agency the following rights in most states:

• Wage garnishment
• Property liens
• Bank account garnishment

Fighting a collection agency debt early on is crucial to avoiding a default judgment down the road. 

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:

Example

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?