Can Credit Card Companies Seize Your Bank Account?
Consumers can use cash to make purchases. There are times, however, when it may be more convenient to use credit to make purchases or pay bills. Still, the use of credit isn't free. If you don't pay the account, it's important to understand how that decision can affect the money in your bank account.
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Significance
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When you obtain a credit card, that extension of credit is based upon a legal contract between you and the card issuer. If you use the credit, the issuer has the expectation that you will pay the amount due on the account. If you fail to make payments, the credit card company can add late payment fees to the account and report that delinquency to the credit bureau. The credit card company can also sue you for not adhering to the terms of the agreement.
Effects
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Depending upon the dollar amount owed, the credit card company may decide to sue you in civil court. The reason the company sues is to obtain a judgment against you. A judgment is a judicial decree issued by the judge that states the dollar amount you're liable to pay back. Once a judgment is entered, the credit card company can use a number of tactics to collect, including garnishment of your wages, a lien against any property you own and seizure of the funds contained within your bank account.
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Considerations
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Although a judgment allows the credit card company to seize your bank account, under certain circumstances the funds contained within that account are protected, depending upon the laws in your state. In general, most government benefits are excluded for seizure. These benefits include money from Social Security, veteran's benefits, public assistance and unemployment insurance. Also, alimony, child support and other funds used to support a dependent may be exempt as well. In addition, funds in your spouse's account may not be seized unless the court authorizes it.
Misconceptions
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If you don't have cash in a bank account or other seizable property, like a home or wage earnings from a job, you may be judgment proof. This means that although the credit card company has a judgment that allows them to collect, you don't have anything for them to get; however, the creditor can legally attempt to collect on that judgment for many years to come. In Florida, the statue of limitations for a judgment is 20 years, which means the creditor has up to 20 years from the date the judgment was entered to collect on it.
Warning
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According to Forbes, consumers should watch out for zombie debt. Zombie debt refers to old debt that has passed your state's statue of limitations, which means you are no longer legally responsible to pay it. Some collection agencies will purchase zombie debt and then attempt to get you to pay it anyway. Also, the agency may sue you in court for that debt. If you appear and inform the court that the debt is expired, the judge will dismiss the suit. But if you fail to appear, the judge will enter a default judgment against you. You are now legally responsible for the debt and the creditor can now seize funds in your bank account.
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