Garnishing bank accounts

Question

I was thinking about getting a bank account. I have had a foreclosure and a repossession. I do not owe any taxes or anything like that. I have a lot of utility bills also on my credit. Can anyone freeze my account or go into my bank account if I get one?

Answer

If you have a foreclosure or repossession in your past, you may be still liable for a "deficiency balance."  A deficiency is when a secured lender forecloses or repossesses the collateral, sells the property, applies the proceeds to the loan balance and still has an amount due on the loan. The lender can still come after you on the deficiency. Note that mortgage lenders can do this in Minnesota only if there was a foreclosure by legal action, rather than foreclosure by notice.

If you owe debt, creditors can garnish your wages or your bank account by suing you, then garnishing your wages or bank accounts based either on the judgment they get in court or on the default judgment they could get if you do not respond to the lawsuit. Thus, if you get a "complaint" (the document that begins a lawsuit), you should contact a lawyer to help you respond to the allegations. There will not be a court date set until you respond to the summons and complaint. If you negotiate a payment plan with the creditor, be sure to put it in writing. Note that the creditors must go through the legal process before they can garnish your wages or bank accounts.

Generally, creditors cannot garnish more than 25% of your net wages. But this 25% restriction does not apply to bank accounts. Creditors also cannot take any of your wages for six (6) months after you have received public assistance based on need. This includes the Minnesota Family Investment Program (MFIP), Emergency Assistance (EA), Work First Program, Medical Assistance (MA), General Assistance (GA), General Assistance Medical Care (GAMC), Emergency General Assistance (EGA), Supplemental Security Income (SSI) and Energy Assistance (EA). If you deposit your public assistance in a bank account, creditors cannot garnish your account for 60 days. Finally, creditors cannot take your home, or car, furniture, employee benefits or insurance proceeds up to certain values.

If you received public assistance, you may claim that your wages and bank accounts are "exempt" from garnishment by promptly returning to the creditor the "Garnishment Exemption Notice and Notice of Intent to Garnish," which is a form the creditor must send to you at least 10 days before garnishment begins. To claim that funds in your bank account are "exempt," you should sign and return within 14 days to the bank (and the creditor’s attorney) the "Exemption Notice," which is a form the bank sends to you when they receive a Garnishment Summons from the creditor to tap your account.

In addition, banks have set-off rights. If you owe a debt to a bank (ready reserve line, credit card, loan, etc.) and have an account at the bank, the bank can take money from your account and apply it to your debt with them without going through the legal process or giving you noticfication.

To protect your funds from being garnished, you must either settle with your creditors or file for bankruptcy protection.

Source: http://www.ag.state.mn.us/consumer/finance/debfactsheet.asp