How does this work?

[RictusGrin]

I have been laid off from my job for about 3 months and am carrying alot of debt (25k in cc, about 20k on an auto loan, yay 7k to the IRS as of today). Seriously considering BK 7 or 13.

I have a new bank account with Bank of America that I started as soon as I was unemployed, the only deposits Ive made into it are my weekly unemployment checks.

However I also have a BoA CC that is now in collections.

My question is can BoA freeze or raid that account for collection of their debt?

Thank you in advance for your answers. I suspect I am about to become a frequent poster on this forum.

[lrprn]

I have a new bank account with Bank of America that I started as soon as I was unemployed, the only deposits Ive made into it are my weekly unemployment checks.

However I also have a BoA CC that is now in collections.

My question is can BoA freeze or raid that account for collection of their debt?

It all depends on the agreement you signed when you opened the bank account. If that agreement includes a cross-collateral clause allowing BofA to take late payments for the BofA cc out of your bank account - and most account agreements with the cc and account held by the same bank or credit union include this clause - then yes, BofA can take money from your bank account to make up the arrears on your BofA cc. They won't have to give you any prior notice either.

As quickly as you can, move the account to a non-BofA bank or credit union. That way you won't have to worry about BofA raiding your bank account due to late cc payments.

[WhatMoney]

The cross-collateral clause may also be called the Right of Setoff, or just Sefoff, for checking and savings accounts. I guarantee you BoA has a Setoff clause in your deposit account agreement. Read it carefully.

I don't have a BoA account agreement in front of me, but all the major banks are about the same. The USBank account setoff, for example, "includes any account you have with us or any of our affiliates, including without limitation, agency, custody, safekeeping, securities, investment, brokerage, and revocable trust account, etc."

They have the legal right, "without demand or prior notice, to take all or part of your property, including money, CD's, securities, and other investment property, financial assets etc. in your accounts against any debt you owe us or our affiliates.

Now this is interesting for USBank, and may be different with other banks:

Our contractual right of setoff does NOT apply:

1) to an account that is an IRA or other tax-deferred retirement account.
2) to a debt that is created by a consumer credit transaction under a credit card plan (but this does not affect our rights under any consensual security interest).
3) to an account where the right of withdrawal a depositor/debtor has with us only arises in a representative capacity (eg, authorized signer, attorney-in-fact, or fiduciary) for someone else.