Loans are pretty popular, and they come with several pros and cons. For instance, with the aid of a loan, you can take care of those impromptu expenses like a leaking roof, medical bills, college fees for your kids, etc. As I said, loans come with some cons. However, if you don’t default on your loans, you may not experience much of the downside, one of which is garnishment. If you fail to pay the money you owe, your account may be garnished by the creditor. And to escape such, you need to open an account that is inaccessible to creditors.
There are ways to open a bank account that no creditor can touch, and they are:
- Opening a bank account only for government benefits
- Opening an account in a state with absolute wage garnishment protection and favorable bank levy laws
- Opening an LLC business bank account
Bank account garnishment can be quite painful. Imagine your account being frozen and all the funds in your account being taken away by a creditor. Well, it’s the creditor’s money, of course. However, I believe there are other amicable ways to compel a debtor to settle his debt. So, if you owe a creditor an amount of money and he has been threatening to garnish your bank account, you’ll surely want to take action and open an account that he can’t touch. But how do you do this? I have outlined all in this article.
How To Get Money From a Closed Bank Account?
How To Open a Bank Account That No Creditor Can Touch?
Imagine a world where you couldn’t take out loans. How do you think business will thrive? How would individuals cater to their needs when they have no money? How would those who can’t afford their medical bills get treatment? Loans, indeed, have made the world a better place. With a loan, you can purchase a house, pay medical bills, school fees, start a business, etc. However, the problem with loans is usually evident when the debtors find it hard to pay their creditors.
If you ask people what their worse fear is, some would say being in debt, especially one that is difficult to settle. A creditor can be your worst nightmare if you default on your loan. Their troubles cause you to lose sleep and have a recurring nightmare. You could lose it if your creditor decides to take things to the next level; that is, take the matter to court where he requests a writ of garnishment to take the money you owe from your account legally.
If you are a debtor, you’ll surely want to protect your bank account from being garnished by a creditor. In addition, if you are opening a bank account, you’ll want to open one that a creditor cannot touch. Below are a few ways to go about that.
Opening a Bank Account Only for Government Benefits:
It is important you note that this option is only available to those receiving funds excluded from garnishment. According to the law, creditors cannot touch these funds within a particular lookback period, which is typically two months. Some examples of exempt funds are:
- Disability benefits
- Retirement benefits
- Unemployment benefits
- Veterans’ benefits
- Life insurance benefits
- Social Security benefits
For the abovementioned funds to be deemed exempt, they have to be directly deposited into your bank account. If you pull out the funds and deposit them into another bank account or deposit them yourself, they are not excluded anymore, and you would have the burden of proof to show that those funds really came from exempt sources.
Setting up a Bank Account in a State With Absolute Wage Garnishment Protection and Favorable Bank Levy Laws:
States have different laws regarding bank account garnishment. Some states have suitable bank garnishment laws, meaning a part of your funds can be protected from being completely garnished even if they aren’t exempt funds like disability benefits, retirement benefits, etc.
Some states (Pennsylvania, North Carolina, South Carolina, and Texas) don’t allow wage garnishment except for tax-related debt, child support, federally guaranteed student loans, including court-ordered fines or restitution. Opening an account in such states can protect your funds from being garnished, provided your debt doesn’t fall in the category mentioned.
When it comes to wage garnishment, a lot of states shield 75% of your income. This denotes that the creditor can only take 25% of your earnings.
As I said, the laws are different in all states. So, the first thing you should do is check the laws in your state of residence. If your state doesn’t have fair laws, search for a local bank in one that has.
Opening an LLC Business Bank Account:
This method is for those who own a business or are planning to establish one. Various solo business owners use their personal bank accounts to operate their business because they feel it is easier to maintain than two accounts.
The benefit of opening a business account for a Limited Liability Company is that the court will see the company as a separate entity from the individual owner. This denotes that if your debt is personal, the creditor wouldn’t be able to touch the funds in the LLC bank account.
How To Cancel a Pending Transaction on Credit Card?
What Type of Bank Account Cannot Be Garnished?
Your creditor is threatening to file a lawsuit in court to garnish your bank account. If he does that, he will be able to access the money in your account legally. Doing so could render you broke. If you have a family, such action could affect their lives. So, what do you do to prevent this? The best alternative here is to open a bank account that cannot be garnished. What type of bank account cannot be touched? You may ask.
There are two major types of bank accounts that cannot be garnished. These bank accounts are an LLC or Limited Liability Company bank account or an offshore bank account. These accounts are out of the rich of creditors as far as a garnishment is concerned.
If you want to set up a bank account that cannot be touched, consider opening an LLC bank account rather than an offshore bank account. This is because opening such a bank account is very expensive as you will need the services of some financial experts and lawyers.
