How to Protect a Checking Account From Creditors
Protecting your accounts is important, especially if you are on a tight budget. However, creditors have been known to get court orders to freeze your bank accounts if you owe them money. But even if you owe private creditors money, you still have rights. As long as you meet the special requirements put into place by the Exempt Income Protection Act of 2009, you may be protected.
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Instructions
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Settle your accounts. This is the most important step to remember. You won't have to worry about your accounts being seized or frozen if you try to work out some sort of payment plan with your creditor. Some creditors will settle for even less than half of what you owe if you make some effort to pay down your debt. Ignoring the problem will only make things worse for you, so try and take care of the problem as soon as you can.
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Move your money to another account. If your checking and savings account are also through the creditor that you are settling with, they may be able to retain monies from your account while settling. It is important to move your money out of that account before you start the settlement process. The money in your checking account can be left available to the creditor and possibly to a third-party agency which gives them the upper hand when it comes to settling your accounts. Also, if you have a debt and an open banking account at the same institution, the "Right of Offset" comes into play. This simply means they can take what is delinquent in your accounts to fulfill the debt.
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Set up separate banking accounts. If you decide to settle with a creditor and make payments, the smart thing to do is set up a separate account with a different bank other than the one that holds your primary banking account. Most of the time when settlements are reached, the creditor wants you to make payments by direct deposit or electronically. Setting up another account with a different banking institution protects you in the event that withdrawals are made earlier or incorrectly.
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Know your rights. If you need to, enforce the EIPA of 2009. The Exempt Income Protection Act protects your accounts from freezing if you owe private debts like credit cards, medical bills and bank loans. Funds in your account such as government benefits, pensions and some earned income are protected. However, accounts are not protected if you have child support debt or owe money to the government for student loans or taxes.
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Tips & Warnings
If your account has been frozen and you have monies in the account that is exempt from this action, you must notify the bank and the creditor immediately.
If your account has been frozen and you receive payments deposited into your account, those monies may also be frozen and you will not have access to it.
