Can a Credit Card Company Garnish Your Bank Account: 4 ways

Garnishment is a legal procedure where debt collectors can get a court order issued against you after they purchase your debt from your creditors. A legal order to levy your bank account allows collectors to gain access to your bank account, get it frozen and take out the portion of your money to cover for the debt. 

This is most likely to happen after you default on your credit card account. Credit debt default rate stood at 3.28% as of 2020 and it is one of the aspects that is severely damaging to an individual’s credit reputation. 

So to answer the question whether credit card companies can garnish your bank account! The answer is yes. When you are no longer able to pay your credit debt and default, the creditors will either garnish your bank account themselves or sell your debt to a debt collection agency at less than its face value

The collectors then have the legal right to recover the debt from you at face value. These consequences follow in extreme cases of credit debt default and can not only get your bank account frozen but also severely damage your credit reputation.

Can Your Spouse’s Bank Account be Garnished for Your Debt

Yes, your spouse’s bank account can be garnished for your debt if they were a cosigner for your credit account. Cosigning refers to getting someone with a good credit score to take legal responsibility for your credit liability when you want a credit card but your credit risk is high. 

If your spouse is a cosigner for your credit account that you defaulted on, the debt liability would legally fall on your spouse and if they can’t pay it either, the creditors can get a court order against their bank account. 

4 Ways to Protect Your Bank Account from Garnishment 

There are several ways you can protect your bank account from creditors. However, even if you are able to protect your bank account from garnishment. Defaulting will severely derail your credit health and it might become extremely difficult for you to impress credit analysts in the future. As far as protecting your bank account goes, below are some of the ways that might be of interest to you. 

1- Keep Only Uncollectible Funds in Your Bank Account

Debt collectors cannot legally get hold of your funds that fall in the “uncollectible” category. This category includes cash assistance and/or social security income. 

2- Switch to A Joint Bank Account

Some states like Florida do not have laws that permit garnishing of bank accounts opened jointly by married couples as Tenants by Entireties. A judgment creditor of either spouse cannot order garnishing of such an account. However, things are different in case of both spouses. Moreover, you only need to have an exempt bank account in such a state even if you’re not a resident of the state in question. 

3- Open Bank Account in a State That Does Not Allow Garnishing

Third option you can look into is to open a bank account in a state that does not allow bank account garnishment by law in the first place. Delaware is one such state where debt collectors cannot get your account frozen regardless of the amount of money you have in the account. Others like New York and South Carolina prohibit the levy if the amount in your account is relatively small. 

The advantage of having a bank account in such a state is that the creditors cannot file a garnishment writ in the first place, unlike for tenants by entireties where defending against garnishment writ in legal proceedings for the time being leaves your bank account vulnerable and the court is not obligated to protect your account on those grounds. 

However, a drawback is that most (not all) banks in these states only accept local customers.

4- Open an Offshore Bank Account

The best option is to have an offshore bank account. Most people think it’s illegal but having an offshore bank account is entirely legal and highly useful. It’s prohibitively costly for debt collectors to get your offshore account frozen to recover funds, especially the one opened in a country that is not party to the Common Reporting Standards (CRS) treaty. The logic behind is that US laws don’t apply in other countries. Offshore accounts opened in countries that are non-CRS are not obligated to report on their clientele, let alone freeze their funds. Georgia is one of the most prominent countries with reputable off-shore banking. The country also hasn’t signed the treaty as of yet but plans to in the near future. 

Contrary to the popular opinion, Swiss banks are no longer feasible for off-shore banking since Switzerland has become a signatory to Common Reporting Standards as of 2017.

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Habib Ur Rehman
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