Are you worried that someone who has a judgment against you will go after your bank account? Many of my clients are petrified and live in constant fear that their hard earned savings will be zapped by a creditor if they leave it in their bank account. However, there are strict rules that must be followed for anyone trying to seize a bank account. Moreover, many distressed debtors have numerous asset protection strategies that they can use to protect their last remaining dollars.
To begin with, any debt collector(s) must have a court judgment against you before he or she can get at your bank account. In a perfect world, the best course of action is to try to negotiate a reasonable payment plan instead of letting someone obtain a judgment against you. However, if you do end up with a court judgment against you, then you consider moving funds from your bank account.
Another move might be to open up a bank account in another state. It is important to emphasize that the out of state bank must not have any branches in New Jersey. A New Jersey writ of execution or a bank levy is only valid only in the Garden State and not in New York or Pennsylvania. However, if you decide to keep your accounts in an out of state bank, then this bank must not have any branches in New Jersey. If an out of state bank does have branches in New Jersey, then this type of asset protection planning will not work.
A debt collector will be targeting your bank accounts that is titled in your name only, or in the name of you and your spouse. However, any bank accounts in your name and the name of someone else other than your spouse will be more difficult for a debt collector to garnish or seize.
Even if the bank account is titled in your name only, there are some types of funds that are considered exempt from debt collection under New Jersey law and/or federal law. The rationale behind these laws is to allow people to preserve the basic necessities for living. Exempt funds only remain exempt when they are deposited in your checking, savings or CD accounts, and only if these funds are readily available for the day to day needs of the recipient. Moreover, these funds can’t be converted into a permanent investment. The most common type of exempt funds are from government benefits. These type of benefits include Social Security, unemployment insurance, veterans’ benefits and public assistance. Moreover, most funds from pensions are also exempt from a bank levy.Continue Reading