State laws require a creditor to inform you when the court grants a judgment against you to force the payment of a delinquent debt. A creditor cannot legally seize money in your bank account until the creditor informs you of the judgment status and provides you with court documentation. If you attended the court hearing relating to the lawsuit, then you already have sufficient knowledge of the court's decision and the creditor may immediately move to seize your accounts per the terms of the default judgment.
The timetable for how quickly a creditor can impose a default judgment and seize your bank accounts depends on your reaction to the lawsuit and your income sources. Answering the lawsuit and appearing in court can buy you more time to fight the judgment than simply avoiding the hearing and waiting to get a letter in the mail. The exempt or nonexempt status of your income under state laws also plays a role.
Required Judgment Notice
Bank Balance Rules
A creditor may have to deal with laws in your state relating to income protection before it may seize your bank account. For example, in New York, under the Exempt Income Protection Act of 2009, a creditor cannot legally exercise a default judgment against you to seize funds in your bank account if your account balance is below $1,740. A creditor must still inform you of the judgment status according to state law, but your bank may not legally honor the judgment if your account falls below the legal level. This allows you to retain the funds in your bank account to pay bills and buy the necessities of life. A creditor may monitor your account closely and may exercise the default judgment if your account balance rises above the legal limit.
Exempt Fund Sources
Certain income sources, including Social Security payments, disbursements from retirement accounts, and worker's compensation insurance, are exempt from seizure under state laws around the country. If your bank account holds only funds from exempt sources, a creditor cannot legally seize the account for payment of a debt -- even with a court judgment in hand. If your account contains mixed funds from protected and unprotected sources, you should inform your bank that the account contains exempt cash, and withdraw all nonexempt funds. This will help avoid any confusion when the creditor approaches the bank to execute a court judgment.
Attending the Hearing
The best chance you have at delaying a creditor's default judgment is to answer the lawsuit in writing and attend the court hearing. Without your presence, the creditor wins the judgment by default. Attending the hearing not only allows you to state your case against your creditor, but it also allows you to file any allowed motions for appeal that can delay a creditor's ability to exercise a judgment against your bank accounts.