Line of Credit Problems

[jerejo]

I currently have a line of credit through a major bank that is past due by about 5 months and we are in the process of retaining an attorney for a BK. To my horror they drained my account of all but $500 the other day. Can they do that? And if so, aren't they suppose to give notice or have some sort of court order stating they are going to? I never received anything stating they were going to do this, or even a phone call. Any suggestions on how to get the money back if I can?

Thank you

[CindyLou]

They should have first gotten a judgement. Did you receive a notice that they were suing you?

[lrprn]

To my horror they drained my account of all but $500 the other day. Can they do that? ... Any suggestions on how to get the money back if I can?

Was there a cross-collaterization clause in the agreement you signed for the bank's line of credit? If there is, then the bank can take money out of any other account in the same bank to pay for overdrafts or late payments in another without notifying you.

Also Cindy's suggestion about a judgment is a possibility too.

Talk to your lawyer immediately to find out what your options are. Sorry you have to deal with this right as you were about to file - the timing couldn't be worse!

[CindyLou]

Good point LRPRN!

Jerejo, Is the line of credit and the bank acct at the same place? If so that may be your answer. I too, like LRPRN am really sorry about the account garishment. You must feel very violated. When I think of someone going into my bank account I think of them coming into my house and going into my purse. It stinks. Unfortunately, because you haven't filed yet the money they have taken is probably gone unless it is exempt due to being from an income like social security or pension, etc. Or if you are from certain states and your the only wage earner and a single parent. What state are you in, what is your income level, what is the source of your income and how many in your household? It is possible that some of it may be recoverable but it will cost you money to get it back. How much did they take?

Another important question is did they satisfy the entire debt because if not they are like waiting vultures and the minute your next paycheck or deposit is made it will be gone so you need to stop the direct deposit and get the remaining money out of the bank fast.

This is a good time to throw a reminder to all of you out there about to file or just having collection problems....do not have have overdue accounts and deposit accounts at the same place...just in case! There are cross-coll. clauses in those fine prints!

[SinkingFast]

Are any of the monies from age or disability??

Many States, funds from pensions, SSI, SSDI, or other Disability payments are Exempt from Banking Institution Garnishments.

If so, you might be able to get that money back, but it'll probably take a while. As in months.

[jerejo]

Thank you all for the quick responses, yes it is the same bank, and yes I think it is the cross-collateral piece. What sucks is that they never notified us at all. The only letter I received was stating a payoff option and that was just days before they took the money out, and left no time to even discuss this with them. Yes we have since yanked all monies out of this bank, and tried to get a stop to our direct deposit, but were just 2 days to late, so as soon as it hits, we will be removing the money out. I just can't believe they can pull w/o any sort of order or notification of such money being taken out. And the money that was in there was from a withdrawal we did form our retirement account to try and save our house. Does that maybe make some difference?

[jp2861]

They could care less where the money came from. Well, as far as notification, they did give it to you, in the contract to link your accounts, or cross collateralization. That's the fine print that none of us read that they use to screw us. They will go after the rest on your next check. So, if I was you I'd be sitting at the ATM at 12:01 on your next payday making a BIG withdrawal.

[lrprn]

And the money that was in there was from a withdrawal we did form our retirement account to try and save our house. Does that maybe make some difference?

I'm sorry to say that it doesn't make a difference. Once you changed the retirement monies (protected) into deposited cash in their account (unprotected), it became fair game.

I wish your lawyer had given you a heads-up about this possibility so you could have opened an account at another bank before this happened

[magyar123]

I'm sorry to say that it doesn't make a difference. Once you changed the retirement monies (protected) into deposited cash in their account (unprotected), it became fair game.

I wish your lawyer had given you a heads-up about this possibility so you could have opened an account at another bank before this happened

.

Huh??? Retirement monies, SS, SDI, other pension benefits are protected from creditor/collection agency theft. Deposits from those sources usually come in the form of automatic deposits with the explanations referring to Social security, etc. Untouchable!!
However - if you get those payments in the form of checks and personally deposit those in the bank, you will have to prove that those were SS/other retirement checks, by getting your bank to pull the documentation(s) of those deposits.

[lrprn]

.Huh??? Retirement monies, SS, SDI, other pension benefits are protected from creditor/collection agency theft. Deposits from those sources usually come in the form of automatic deposits with the explanations referring to Social security, etc. Untouchable!!

Sorry, magyar - not true when you convert protected 401K retirement funds to cash as the OP did in this case.

That's why draining retirement accounts before filing is such a big mistake. In this case, the OP took an early withdrawal of a protected asset - his retirement fund - and made it an unprotected asset - cash - in an open checking account. That's why in this case, the money could legally be taken by the bank.

[magyar123]

Sorry, magyar - not true when you convert protected 401K retirement funds to cash as the OP did in this case.

That's why draining retirement accounts before filing is such a big mistake. In this case, the OP took an early withdrawal of a protected asset - his retirement fund - and made it an unprotected asset - cash - in an open checking account. That's why in this case, the money could legally be taken by the bank.

Makes sense.......but I have a hunch that once the shrub rides off into the sunset towards Texas, these creditor/collection agencies will have to deal with laws prohibiting thefts like that. 401 money will be considered untouchable - no matter if still in the plan or in your bank account - if the individual can prove that it is from a retirement account.

[jp2861]

Makes sense.......but I have a hunch that once the shrub rides off into the sunset towards Texas, these creditor/collection agencies will have to deal with laws prohibiting thefts like that. 401 money will be considered untouchable - no matter if still in the plan or in your bank account - if the individual can prove that it is from a retirement account.

Not true! Unless it is an account that designated the funds as exempt, it won't be protected. There isn't a bank in the world that will go against a court order telling them to fess up the money. The bank WILL give the money...next, the account holder will notice the funds missing...then the account holder must take the creditor to court to prove that source of the funds came from an exempt source. The account holder will get the money back AFTER going through the courts. If you believe the banks will do a trace of where the money came from, and label it as exempt, and basically fight your case for you, then refuse to give up the money, you're in for a big surprise. They'll follow the court order every time.

Basically, exempt funds are not garnishable at the employer level. Once it flows downstream to a deposit account it's fair game. No longer untouchable. So, the only way around it, to be safe, is to receive a paper check, and live off cash and money orders. Even if you change accounts, it's just a matter of time until the new account is found, and robbed.

Until, a mechanism is put in place at the bank level to open special accounts that designate the deposits as exempt, the money will never be protected. And, I just don't see that happening.

[CindyLou]

Because the OP is not receiving the fund in the form of RETIREMENT monies, the funds are touchable! The were done as an early withdrawl, which is not different than a regular paycheck in the eyes of being exempt. It only remains exempt as long as it remains in the retirement account or until you reach retirement age and begin withdrawing it within the "rules" of retirement. Unfortunately these funds are in now way protected.

My advice on the direct deposit that you can't stop is to close the account completely. Your paycheck will then be returned to your employer who will then be forced to pay you by paper check. IF the check gets deposited my guess is it will be taken faster than you can say withdrawl!!

Good luck

[jp2861]

Because the OP is not receiving the fund in the form of RETIREMENT monies, the funds are touchable! The were done as an early withdrawl, which is not different than a regular paycheck in the eyes of being exempt. It only remains exempt as long as it remains in the retirement account or until you reach retirement age and begin withdrawing it within the "rules" of retirement. Unfortunately these funds are in now way protected.

It doesn't matter if it's retirement money, or age, or withdrawn under the rules of retirement. Once any money hits a checking account it is NOT protected. The law may say that the funds are exempt but as far as a collector, and the bank for that matter, are concerned, there is absolutely nothing showing those funds as exempt. They will be given away.