Do I need to close ALL bank accounts after defaulting? Do PayPal accounts get frozen?

[Violet]

Hello,

I stopped paying my creditors six months ago. The incessant phone calls have largely stopped, and I am starting to get the "Final Warning" settlement offers. I am unemployed in southeast Michigan with no income except for what I hope to get this fall selling off some of my things on eBay.

I had two checking accounts. I closed my local bank account that I used for paying bills. After reading horror stories about Bank of America (one of my creditors) making unauthorized deductions, I thought it best to get rid of that one.

However, I still have an account with ING Direct. I actually have had a balance of zero since soon after my account with the defunct NetBank was rolled over to them. For some reason they haven't closed it. I only used it once to transfer money from my now defunct local account.

Since I never used this account to pay bills (though I did use the original NetBank account for that), would it be safe to keep a small amount of money in it? What are the chances that my creditors would find this account? I'm in Michigan, and ING is in Minnesota. Is it hard to get a new credit union or bank account if one has no job and bad credit? That's the only reason I am thinking of hanging on to the ING account.

Other question: I plan to sell some things online this fall to come up with the money for Chapter 7. How often do PayPal accounts get frozen or drained by collectors? I have a PayPal debit card, so I can just take money directly from PayPal without having to go through a bank.

Thanks,
Violet

[lala]

I can't really answer your questions, but I'm wondering what your "final warning" settlement offers are?

[Violet]

FIA card services demanded that I pay $200 by next week or they'd sell of my account or sue me. I had to google FIA to find out that FIA is connected with Bank of America. I love how they demand money without making it clear which $#%@^@@!!! account they are referring to.

American Express offered to settle a $3000 account for about $1900.

I wish I could settle, but at this point I don't even have the money for Chapter 7. I have no house, job, or money in the bank, so I'm hoping no one will sue me anytime soon. My credit report lists me as "self-employed", so I'm hoping that they'll guess rightly that suing me would be a waste of money. As I live in the Detroit area, I'm curious as to how backed up the courts are anyway.

Other than the two above-mentioned settlement offers, I've only received a few offering to settle for 60% or so several months back. I was surprised not to receive more as the 180-day mark got closer. Maybe they all assumed I wouldn't even have enough to settle.

[Rob517]

Well I am on month 5 without paying on my Paypal buyer credit line and I was still able to sell an item on Ebay and then witrhdraw the funds out of my Paypal account via bank transfer. They have not said a word in regards to closing my regular Paypal account although they have obviously closed the buyer credit account. I thought for sure they would take any funds coming in to the Paypal account to pay the buyer credit account. I was convinced they had that stipulation buried in their "terms and conditions" somewhere but so far not so much.

Creditors must have a judgement against u to garnish wages and accounts. But I have read on here where they have withdrew money without that which I believe is illegal.

[optimistic1]

Other question: I plan to sell some things online this fall to come up with the money for Chapter 7. How often do PayPal accounts get frozen or drained by collectors? I have a PayPal debit card, so I can just take money directly from PayPal without having to go through a bank.

Thanks,
Violet

Make sure the things you sell are reported on your attorney questionnaire sheet, its better to be safe than sorry.

I had two Paypal accounts with credit accounts attached to them, I never had anything "drained". I would not worry about it.

But I have read on here where they have withdrew money without that which I believe is illegal.

Not illegal at all, its in the fine print (the stuff people never read), its called a cross-collateralization clause.

[catleg]

I've never heard of any cross-collateralization between Paypal and any credit account so you're probably safe. I defaulted on the Paypal credit card with GE Money Bank and it hasn't affected my paypal.

[Rob517]

Not illegal at all, its in the fine print (the stuff people never read), its called a cross-collateralization clause.

I assume the cross-collateralization is specific to that type of situation where you may also bank with the holder of the CC's??

Would this be the same for regular CC's such as Capitol one or Chase if all that you have with them is a CC and no bank accounts? For example....Chase can't take money from my TCF account for a defaulted CC without a judgement..correct?

[optimistic1]

Correct, and yes your example is correct. Although, I have heard of stories about people that setup online payments (re-curring and not), with their bank account info stored so they could pay their cc payment online. After defaulting the cc company then makes a transaction for several hundred dollars, and dumps your accounts out. But to me, that undoubtedly is illegal, but who knows, it might be in the fine print.

The legislation that was passed recently I think is supposed to force cc issuers to start providing consumers with contract information that they can understand without a law degree.

Whether or not that is true, I dont know.

Its always best to just go establish a nice new clean bank account that only you and the bank know the account numbers and routing numbers to. Then you can sleep at night, at least until a writ of garnishment is served anyway.

[Pizza]

No judgment = illegal account seizure unless the creditors owns your checking account.

Don't let a creditor get a judgment because they can subpoena you for account information if you hide money in an unknown bank.

[Pizza]

Depending on what state you live in bank accounts and assets can be seized prior to a judgment being awarded. A motion filed with the court at the same time as the summons and complaint can ask the court to seize asset and bank accounts of the defendant.

So you make the statement : "Don't let a creditor get a judgment because they can subpoena you for account information if you hide money in an unknown bank."

So just how do you stop a creditor from getting a judgment? I am really interested to know the trick to this.

Do you know what the process is to "subpoena" (as you call it) for your account information? I really would like to know if you could please to explain what you think the process is. Also can you tell me how often this occurs and under what circumstances it typically occurs?

Also how do they get information about unknown bank accounts...or better what is an unknown bank account vs. a known bank account?

"Don't let a creditor get a judgment" means what you probably thought it means!

If you are without a doubt been sued, see an attorney and get the ball rolling. The economy is in a mess and the courts are backed up, which gives a small window to file if you put your running shoes on. The informational subpoena comes AFTER the judgment - there is no way a creditor is legally entitled to your personal information unless they win a lawsuit, so squash that subpoena!

In the meantime, you can keep money in the bank IF you never write a check to your creditors for them to easily locate it. I would go with a small branch. I have to get to work, but I can elaborate more later. Search my posts and you'll find one with a sample informational subpoena as a link.

[treehugger1]

I'll add my thoughts here. In my state, once a suit has been initiated, and an answer filed, discovery can begin immediately. This includes requesting depositions related to the alleged debtor's financial situation. In addition, the attorney can ask for a summary judgment prior to trial. Answering a suit may put one at a disadvantage; opening yourself up to all kinds of information pursuits PRIOR to a judgment.

As BB stated, once an action has been started, then the only money you might be allowed to use in a bank account, is the money that would be ordinarily exempt under your state exemption laws. For instance, if you had $1000 then under the 75% exemption law, you are entitiled to $750.00.

[DSIG]

Violet, they can freeze bank accounts only in the state where you live and they would have to file in the district where you live to sue you. So, first things first, they have to find you.

If you have a bank account and that bank only has a branch in Texas, lets say, and no branches elsewhere, they cannot sue you in Michigan and freeze your account in Texas. If your account is in Michigan and they find it, they will freeze it. They may do a local asset search to see if you own any bank accounts prior to sueing. If they see that you dont have assets, it may not be worth their time. If the amount of debt is not too much, an asset search may not even be worth their time and a lawsuit may be filed anyway to illicit your response. If you dont respond, they win by default.

Same with wage garnishment. If your employer is in another state other than where you live with no office or physical presence in your state, and you are served in your state, your employer would also have to have an office in your state to be served with papers.

[treehugger1]

If the debt is big enough and they win a suit, and they seem convinced you are employed, in many states it takes very little time and very little cost to domesticate an out-of-state judgment in the state you reside in. This seems to be the general case when I look at state laws. This does the creditor/CA no good if you are in a non-wage garnishment state, however, bank accounts are still ripe for picking.

And, in some states, there is no such thing as freezing a bank account. For instance, some states have a 24 hr rule that states only the money in your account on the first business day the bank receives the writ. You should always check your own state laws.

[DSIG]

upon getting served, can you stahl in (up until the deadline) filling out the docs where you list your assets and accounts, and in the interim drain your checking account?

[treehugger1]

I suppose it depends upon your state. However, as BB pointed out, once the suit is filed by the plaintiff an dif you knew or had reason to believe a suit had been filed, then cash is often treated as an asset, and withdrawing non-exempt funds could be construed to be fraudulent against former, current, or future creditors. That is what is says in my state's uniform transfer law. Now until you have been served, how would you know a suit had been filed. I don't think anyone expects you to go down and check with the courthouse everyday. I think that in general these fraudulent transfer laws (outside of BK) are generally there to keep people from selling real property, giving $1000's of dollars away, or selling off any non-exempt assets. In Oregon, $7500 of exempt cash on deposit at a bank is exempt. That does NOT mean someone would not go after it. If you had $10K on deposit at the time the suit was initiated, then technically, you can withdraw $7500.

It seems that i hear more tales about CA's/creditor's/etc sucking money out of bank accounts than I hear about attorneys doing so. Think about it, if you believe you are close to being sued, why on earth would you leave any money lying around on deposit where your bank account information had been shared with the plaintiff on prior occasions? On the other hand, if you stop paying on your credit agreements, you should assume that someone might eventually sue you. At that time, then you should start looking into alternative personal financial models. You are entitled to protect any exempt assets. There is nothing illegal about protecting exempt assets.

Months before I finally had to stop paying creditors, I abandoned all checking and savings accounts. They would call with "deals" and ask for a routing and account number. I told them I did not have a bank account available to me. I didn't. This was another part of the problem in the end. They refused to work with me unless I gave them an account number. I offered MO's and US mail. THey said no. Now, they must pound sand.

Any record currently in a CA's or collection attorney's office clearly shows no checking account. My trashed credit report clearly shows no mortage or any other real assets. It does show many charge-offs and collections, and judgments. I'm not a ripe and tasty debtor to most collectors.