Author Topic: Protecting your Bank Account  (Read 28656 times)

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Flyingifr

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Protecting your Bank Account
« on: October 15, 2005 12:36:26 AM »
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A frequent issue is this: "A Creditor just seized my bank account and I can't pay my (rent    mortgage    child support    alimony    bookie    etc...) How do I protect myself?"

If a creditor manages to grab a bank account    it is because you failed to take any steps to protect yourself. Some steps you can take to protect yourself are so simple that you may slap your forehead in disbelief that you didn't think of it yourself.

First    let's look at what has already happened: No creditor except the IRS can grab a bank account without first getting a Judgment. If you read and follow the Flyingifr Method    that is unlikely    but not impossible. let's face it    the bad guys do win occasionally. So    the first step is to fight the creditor in Court tooth and nail. Creditors attorneys depend on getting lots of Default judgments    and they hate it when they have to process one case at a time. By fighting the suit    you make the attorney expend more time and office resources on your one case than they would on 100 other cases that don't fight back    combined. This alone may tend to soften them up for a settlement and thereby prevent a Judgment.

Now    let's assume you lost in Court and they get the Judgment. Now what? You should immediately assume they know where you are banking and CLOSE ALL EXISTING BANK ACCOUNTS. Use the "poor man's bank" - Travelers Checks and Money Orders. They can be replaced if lost or stolen and no creditor can attach them.

A Judgment is best compared to a hunting license. Just like buying a hunting license gives you the right to get up one cold morning and look for a deer    getting a Judgment gives a creditor the right to look for your assets. Neither the hunting license nor the Judgment is a guarantee of success    and just like the deer hasa vested interest in not being found and shot    you have a vested interest in not having your assets found. The big two assets a creditor will look for are a paycheck and a bank account.

The Consumer Credit protection Act limits paycheck garnishment to a maximum of 25% of disposable income (gross pay minus legally required deductions) subject to an minimum net pay of 40 times the minimum wage. Some state laws restrict it further. Some states    like Texas    do not allow wage garnishment. FIRST - learn the garnishment rules in your State (note - the IRS is subject to entirely different rules).

Bank Account attachments have no restrictions - a creditor with a judgment can take the whole thing    regardless of balance    up to the amount owed. There may be restrictions on this based on the source of funds in the account (Social Security or Unemployment being some examples) but that fight can be messy - better to avoid the issue altogether by making it so that your creditor cannot find the account at all.

So    let's discuss legal ways of keeping your bank account off a creditor's radar screen.

OPTION 1: Move your account to a bank far away. When I was having my creditor issues    I lived first in NY and then in AZ. Where did I bank? St Paul MN. I opened my account over the internet and made my deposits by mail. The bank gave me a debit card so I could make most purchases with that    and could access cash when needed. the most cost-effective way to do that is the "cash-back" option when making a debit card purchase - no fee for the cash taken. If you must use an ATM    take enough cash to lasta t least a week    so that the fees have minimal impact. The ATM fees are the same for a $200 withdrawal as they are for a $20 withdrawal. How does this work? Creditors and CA's tend to look for bank accounts near where you live or work. Most people do their banking that way. By banking far away - at least several states away - you make it much harder for them to find your bank account.

OPTION 2 - Use Option 1    but park your idle cash in a cyberbank like Paypal. Paypal will also give youa debit card and actually credits your account with 1.5% of each use of the debit card (use it like a credit card without entering a PIN)!! And as of the writing of this article (10/10/2005) they pay 3% interest    at least double what the brick-and-mortar banks pay. How id this added safety? Simple - paypal has a Maters Account at Bank One (or Chase - B1 and Chase recently merged). Your Paypal account is a sub-account in that bank. Even if Chase or B-1 is a creditor of yours    your money is safe from them because the Account Holder is Paypal. You can park your excess funds in Paypal and wire them to your brick-and-mortar bank (free) when you need to cover a check you wrote. You cannot write checks against your Paypal account.

OPTION 3: Another option is to become a signatory on an account that is not titled in your name. This is usually done by establishing a separate legal entity (Trust    Corporation or Limited Liability Company). I would like to point out that this option is best done by people with a legitimate business of their own    even if it is part time. By establishing a separate legal entity    the money in taht account (technically) is not yours - it belongs to the entity. A creditor can no more attach the entity's money for you debt than they could attach your next door neighbor's account for your debt. There are legal steps taht must be taken to establish the entity    and those steps vary from state to state. Here in Arizona    you must file your Certificate of Organization with the Corporation Commission    publish the Certificate three times in the newspaper and then file the Certificate of Publication with teh Corporation Commission. Then you obtain a Taxpayer Identification Number from the IRS and register with the State Department. Consult an attorney and accountant before doing this    as there are lots more considerations.

What happens if    after obtaining a Judgment    the creditor's attorney demands I answer a "Debtor's Examination"?

A Debtor's Examination (DE) (also called Supplemental proceedings) is a form you are required    under Court order    to fill out fully and truthfully. The purpose of the DE is to unable the attorney to locate assets of yours to attach. Failure or refusal to answer    or answer truthfully    can be punished as Contempt of Court.

That said    it sure sounds like a DE will uncover your bank account    and it will. But what is true today can be obsolete or false tomorrow. So    answer truthfully. And tomorrow close the account and open another one somewhere else. There is nothing illegal about it - the law requires you to answer truthfully    and you did. The answers were truthful as of the date you answered. The law does not require you to just sit there and wait to get run over. Most states only permit DE's to be held once a year at most.

Get the hint? This also applies to jobs. Where you work today need not be where you work tomorrow.
« Last Edit: January 19, 2006 03:11:49 AM by flyingifr »
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

Morality of Debt? No one ever went to the Nether Regions for not paying a debt.

Founder of the Credit Terrorist Training Camp (Debtorboards)

Avery

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Re: Protecting your Bank Account
« Reply #1 on: January 11, 2006 05:44:19 AM »
Flyingifr,

What about private banking/bookkeeping?  In other words, hiring a bookkeeping service to manager just your banking.  Some services will do this this not only for small and large businesses but for individuals too.  You wouldn't necessarily require their other services such as payroll, taxes, etc., but having them manage your banking affairs should be pretty private. What are your thoughts?

Flyingifr

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Re: Protecting your Bank Account
« Reply #2 on: January 11, 2006 06:40:38 AM »
Flyingifr,

What about private banking/bookkeeping?  In other words, hiring a bookkeeping service to manager just your banking.  Some services will do this this not only for small and large businesses but for individuals too.  You wouldn't necessarily require their other services such as payroll, taxes, etc., but having them manage your banking affairs should be pretty private. What are your thoughts?

Are you prepared to lose all your money if they go out of business? Given a choice between the private bookkeeping service and tin cans buried in the back yard, I'd feel safer with the tin cans.
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

Morality of Debt? No one ever went to the Nether Regions for not paying a debt.

Founder of the Credit Terrorist Training Camp (Debtorboards)

Enigma

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Re: Protecting your Bank Account
« Reply #3 on: March 11, 2006 06:27:28 AM »
There are 2 states that I know of that allow a creditor and or CA to granish a bank account without a judgment.

Freedom Rising

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Re: Protecting your Bank Account
« Reply #4 on: March 11, 2006 03:51:11 PM »
There are 2 states that I know of that allow a creditor and or CA to granish a bank account without a judgment.

Which states are these?


TIA

Enigma

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Re: Protecting your Bank Account
« Reply #5 on: March 11, 2006 06:45:18 PM »
MN and I beleive NY

phoenix2ny

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Re: Protecting your Bank Account
« Reply #6 on: March 13, 2006 05:35:46 AM »
NY does NOT allow pre-judgment garnishment.

Enigma

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Re: Protecting your Bank Account
« Reply #7 on: March 13, 2006 06:53:17 PM »

Doctor Evil

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Re: Protecting your Bank Account
« Reply #8 on: March 14, 2006 12:57:49 PM »
NY does NOT allow pre-judgment garnishment.

Unfortunately that is correct.

Flyingifr

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Re: Protecting your Bank Account
« Reply #9 on: March 14, 2006 01:25:37 PM »
NY does NOT allow pre-judgment garnishment.

Unfortunately that is correct.

The inconsiderateness of the NY legislature - making the poor oppressed creditor actually go to Court and PROVE the claim before allowing the defendant's assets to be siezed. How absurd!!! Next they will expect the trial to be held BEFORE the defendant is executed.
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

Morality of Debt? No one ever went to the Nether Regions for not paying a debt.

Founder of the Credit Terrorist Training Camp (Debtorboards)

Doctor Evil

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Re: Protecting your Bank Account
« Reply #10 on: March 14, 2006 01:43:22 PM »
NY does NOT allow pre-judgment garnishment.

Unfortunately that is correct.

The inconsiderateness of the NY legislature - making the poor oppressed creditor actually go to Court and PROVE the claim before allowing the defendant's assets to be siezed. How absurd!!! Next they will expect the trial to be held BEFORE the defendant is executed.

I agree but usually the creditor doesn't have to go to court, or prove the claim since most debtors ignore everything that is mailed or served upon them, that is until they realise that their paychecks are 10% lighter or their bank account is frozen. 

It would save alot of trees if assets can be taken without the formality of legal action.

Rottweiler

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Re: Protecting your Bank Account
« Reply #11 on: March 14, 2006 03:46:40 PM »
It would also save a lot of trees if the attorney made sure that proper service is accomplished so that the alleged debtor knows about the court action. 

And, that the only ones who are sued are those whose accounts can be proven conclusively and on a timely basis. And, if judgment is obtained, the attorney who is handling the execution actually follows the law and makes sure the judgment debtor is properly notified of court hearings, and  the attorney makes sure his/her client (or they have as their representative)  has fulfilled all their responsibilities under the law to make sure that their pleadings are truthful...which is all too often not done.

In any case, there is no need for pre-judgment remedies in nearly all cases.  Only when it can be conclusively proven that assets will almost certainly be dissipated or hidden if they are not frozen prior to trial should such remedies even be allowed to be applied for, never mind granted!  Yes, the statute usually reads in a way so as to appear to grant just this type of protection to the defendant (the alleged debtor).  In practice, however, the opposite happens all too frequently..

Doctor Evil

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Re: Protecting your Bank Account
« Reply #12 on: March 14, 2006 03:55:26 PM »
It would also save a lot of trees if the attorney made sure that proper service is accomplished so that the alleged debtor knows about the court action. 

Agreed, however in my experience, a very high percentage of those who are even personally served, don't feel the need to do anything until they see a real consequence.

And, that the only ones who are sued are those whose accounts can be proven conclusively and on a timely basis. And, if judgment is obtained, the attorney who is handling the execution actually follows the law and makes sure the judgment debtor is properly notified of court hearings, and  the attorney makes sure his/her client (or they have as their representative)  has fulfilled all their responsibilities under the law to make sure that their pleadings are truthful...which is all too often not done.

Agree on all respects, if this is done, a judgment is a foregone conclusion regardless of any defenses put up by the debtor.  The key is that the debtor has to appear in the action, without this, there are no court hearings.  If a debtor wants his or her day in court, he or she is the one who has to ensure that they get it. 
In any case, there is no need for pre-judgment remedies in nearly all cases.  Only when it can be conclusively proven that assets will almost certainly be dissipated or hidden if they are not frozen prior to trial should such remedies even be allowed to be applied for, never mind granted!  Yes, the statute usually reads in a way so as to appear to grant just this type of protection to the defendant (the alleged debtor).  In practice, however, the opposite happens all too frequently..

I agree and the legislatures of almost every state (MN is the only hold out I know of) agree as well.

kaxmaII3

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Re: Protecting your Bank Account
« Reply #13 on: April 03, 2006 03:32:53 AM »
Does anyone have a DEFINITIVE list of those states where there are PRE-JUDGEMENT freezes of bank accounts?

Any help is appreciated...need a complete list.

knight

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Re: Protecting your Bank Account
« Reply #14 on: May 26, 2006 02:08:31 AM »
Great info F.  ;)

I have a question. I am only starting to clean up my CR. I had a secured car loan from a Credit Union for 16K. The remaining balance so far is 8K. Haven't made any payments on the vehicle in more than a year now. This is by far the largest debt I have. All others are in the hundreds. I was expecting the bank to repossess on the car, so I stopped driving it and got me an old one. (all paid for) However it did not happen and this is because they could not locate me. I have stopped all kind of correspondence with them. I also moved twice to a different states. (due to work)

Anyway, this is the thing that worries me a bit. I have always planned to pay these people, but they never give you a break. You have some emergency in life, you miss a $400 payment. Next thing they are asking for $800 with an extra $100 LF, then it's $1450, then you are like: OK YOU GOT ME. I give up.  ??? I know they may seek a judgment, but on my CR, they only state that "unable to locate debtor- charged off as bad debt- profit and lost write-off" And they state: Amount past due is approx. $4k.  No collection Agencies (my lovely friends) were involved so far in this debt. This CU has its own in-house collection office.

I know they may sue me and that's why I am asking this question about bank accounts. I am in the military, and these people know this. Now Flying (OP) stated that we should be careful with our bank accounts, and maybe get one very far away from where I live (online account). I have a USAA account which is an online account. It is merely for military people. Do you think it would be a wrong idea to keep a direct deposit to this account? They may just say: well hold on! This guy is in the military; let's check all the banks that work for the military.

I am also postponing updating my address until I have a strategy to deal with this creditor. They are a small Credit Union, but really very inflexible. Tough to deal with and I don't want to call or write them until I have at least 2K or more put aside for a settlement.

Finally, your help is appreciated and any suggestions or opinions about my situation are more than welcomed.

Sincerely,

KT
All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation. John Adams

Anyone who works in collections has one single Job: To locate people's asset and seize them. His job is not to be your friend or help you as he may say, his job is to take your money. K.T.

 

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