Prepaid Card instead of Bank Account

[VirginiaGuy]

About six months ago I defaulted on a major unsecured debt and I am trying to make sure that my assets don't suddenly disappear if the creditor decides to go to court and get a judgment. I have read a lot about using prepaid cards instead of banks in this situation because bank accounts can be frozen and garnished, while prepaid cards are more like a piece of property. I was wondering if anyone had any recommendations regarding prepaid cards. I'm looking for one with low fees of course, and one that will replace my funds if lost or stolen. Also I would probably be direct depositing my paycheck onto the card so I would like it to have that capability too.

Also, is it easy for the creditor to find out that the prepaid card exists? Will the creditor even know?

[jacko]

The Wal Mart Money Visa Card may fit your needs. There is no fee for direct deposit. If you load the card with cash, the fee is $3 per deposit. Also, a $3 monthly service charge and Bill Pay is less than a $1 per transaction.

Be pro active and protect your cash. Debit cards are not checking accounts. You may want to keep your checking account open with a small balance for free bill pay to keep up appearance. So when you have to respond to a debtor exam, you can list your checking account to comply knowing your cash is safe elsewhere.

I had my mom open up a student edition of the Wal-Mart Money Card. The card is in her name with a courtesy card for me. So, I would not have to acknowledge it if they change the debtor exam to include said debit cards.

[pepperoncini]

I've been wondering the same thing.

Can paychecks be "direct deposited" onto prepaid cards? Or would it be something where one would ahve to cash a paper check and then load a card?

[treehugger1]

There are plenty of options. The walmart card is a inexpensive one, but you are limited to $3000.00 on the card at any one time.

You can check out Netspend, Freedom Bank, AccountNow, ready debit, etc. Ready debit seems to be one of the least expensive $7.95 monthly service fee. There are other fees, but you can check them out. These cards allow up to $10K on the card.

Capital1 has a new prepaid card. The monthly service fee is $4.95 which is pretty cheap. You can have up to $7.5K on the card.

All of the above, including C1, state that the card does not constitute a bank account, nor a "deposit" account. Yet, all are FDIC covered.

Bank of America has a card called "cashpay." My understanding is that this is similar to a checking account.

Google any of the above.

[Kirby]

About six months ago I defaulted on a major unsecured debt and I am trying to make sure that my assets don't suddenly disappear if the creditor decides to go to court and get a judgment. I have read a lot about using prepaid cards instead of banks in this situation because bank accounts can be frozen and garnished, while prepaid cards are more like a piece of property. I was wondering if anyone had any recommendations regarding prepaid cards. I'm looking for one with low fees of course, and one that will replace my funds if lost or stolen. Also I would probably be direct depositing my paycheck onto the card so I would like it to have that capability too.

Also, is it easy for the creditor to find out that the prepaid card exists? Will the creditor even know?

I would lose sleep until I make SURE about that "prepaid cards are more like a piece of property" thing. As far as direct-depositing your paycheck onto one of these cards, couldn't any 12-year-old follow the trail from your employer to the card, thereby jeopardizing all the funds you put on that card? Please post what you learn about the "piece of property" loophole - until then, I'm losing sleep for you over this one.

[VirginiaGuy]

I would lose sleep until I make SURE about that "prepaid cards are more like a piece of property" thing. As far as direct-depositing your paycheck onto one of these cards, couldn't any 12-year-old follow the trail from your employer to the card, thereby jeopardizing all the funds you put on that card? Please post what you learn about the "piece of property" loophole - until then, I'm losing sleep for you over this one.

LOL. Thanks for losing sleep FOR me, because I like to sleep :-)

Yes, certainly any 12 year old could figure it out. Any funds that you or I keep on a debit card where we're also getting our paycheck will be discovered by the creditor. BUT that will only happen after the judgment has been rendered and we're called in to be interrogated by the court so that our assets can be discovered. At least that's the way I understand it. The way creditors find bank accounts so easily is that they basically correspond with all the banks in your area until they find yours and then get the writ of execution to be applied to your account. With a prepaid card, FIRST the creditor would have to get some kind of court order to make your employer reveal where the check is being deposited, THEN the creditor would have to try to domesticate the judgment in whatever state the bank that owns your card is located, and if it's a different state, that takes awhile, definitely long enough for you to find out about it and pull your money out.

So the card basically ensures that you don't get caught off guard and buys you more time to get your money out of a garnishable account. But yes any creditor who really wants to find out where your assets are will find out about that if they sue you, and you'll be forced to turn it over eventually unless you spend it all before they can get to it I guess.

Ultimately the only way a creditor absolutely won't find money is if it's buried in your backyard. But I think a lot of debtors figure that if their bank account is dry and if they live in a state where wages aren't garnished, or if they have no wages, that creditors will go for lower hanging fruit instead of having the sheriff go through their sock drawer.

[Kirby]

LOL. Thanks for losing sleep FOR me, because I like to sleep :-)

Yes, certainly any 12 year old could figure it out. Any funds that you or I keep on a debit card where we're also getting our paycheck will be discovered by the creditor. BUT that will only happen after the judgment has been rendered and we're called in to be interrogated by the court so that our assets can be discovered. At least that's the way I understand it. The way creditors find bank accounts so easily is that they basically correspond with all the banks in your area until they find yours and then get the writ of execution to be applied to your account. With a prepaid card, FIRST the creditor would have to get some kind of court order to make your employer reveal where the check is being deposited, THEN the creditor would have to try to domesticate the judgment in whatever state the bank that owns your card is located, and if it's a different state, that takes awhile, definitely long enough for you to find out about it and pull your money out.

So the card basically ensures that you don't get caught off guard and buys you more time to get your money out of a garnishable account. But yes any creditor who really wants to find out where your assets are will find out about that if they sue you, and you'll be forced to turn it over eventually unless you spend it all before they can get to it I guess.

Ultimately the only way a creditor absolutely won't find money is if it's buried in your backyard. But I think a lot of debtors figure that if their bank account is dry and if they live in a state where wages aren't garnished, or if they have no wages, that creditors will go for lower hanging fruit instead of having the sheriff go through their sock drawer.

Happy to oblige with the losing-sleep-for-you thing there! But only for tonight.

"...the only way a creditor absolutely won't find money is if it's buried in your backyard..." is why I would go with cashing my paychecks and building up my girly shoveling muscles.

(P.S. Hey - am I the only one who thinks creditors are here reading all our clever posts?)

[dscurlock]

I can not be so sure that even pre-paid cards can be safe from levy...it maybe prepaid, but is it really safe from being frozen with court order? Even paying bills with bill pay will leave a trace back to the card...even walmart is not immune from court orders....If you have money in any type of account, then I would never assume it would be safe. however, if there is no ss number tied to a pre-paid, then I think you would be safer then a bank, but if a ss is tied to a pre-paid lets say from a bank, then I would bet you will be found in no time...

[lovemybugs10]

They have to sue you to get to your bank account, correct?

[flyinbroke]

They have to sue you to get to your bank account, correct?

Yes, unless you owe the government.

[ryan]

Another approach here, or a variation, would be to have more than one pre-paid card. Say, one at walmart, one from net spend and one from Cap1 just as an example. Then limit how much you keep each loaded for. So, in the unlikely event a creditor trying to enforce a judgment gets to one your loss will be much less.

[SubXero]

If I was worried about liens etc I would not use direct deposit to a prepaid card.

Those are really just bank accounts if it says FDIC insured.

Garnishment would go through your employer so no matter where you put the money if you were garnished the money would be taken before you receive a check. One way to avoid garnishment is by establishing residence in a state that has pro people garnishment laws and being paid by 1099 since in that case you are your own employer then load cash onto a prepaid card as needed. I know someone who avoided an IRS garnishment for 9 years (they have 10 to collect on a tax debt) by registering as a dba with a city then setting up check cashing for those checks so no name was legally on anything except on the back of a check that was deposited by someone else.

AAA Visa Travel money card free to reload for AAA members (you have to lose the original card to get a personalized card sent out) or the Money Network card which loads for $2 at any 7-Eleven.

[jacko]

How about contributing to a Roth IRA? You can do tax free withdrawals after each deposit is 5 years old before retirement age kicks in? You would be earning at least 8% return average.

If I was worried about liens etc I would not use direct deposit to a prepaid card.

Those are really just bank accounts if it says FDIC insured.

Garnishment would go through your employer so no matter where you put the money if you were garnished the money would be taken before you receive a check. One way to avoid garnishment is by establishing residence in a state that has pro people garnishment laws and being paid by 1099 since in that case you are your own employer then load cash onto a prepaid card as needed. I know someone who avoided an IRS garnishment for 9 years (they have 10 to collect on a tax debt) by registering as a dba with a city then setting up check cashing for those checks so no name was legally on anything except on the back of a check that was deposited by someone else.

AAA Visa Travel money card free to reload for AAA members (you have to lose the original card to get a personalized card sent out) or the Money Network card which loads for $2 at any 7-Eleven.

[treehugger1]

Those are really just bank accounts if it says FDIC insured.

Hmm, all of the banking folks I have spoken with tell me that the prepaid cards are not bank accounts, no matter what lay-persons think. And, by some quirk in the banking regs, the FDIC does insure the money on most prepaid cards. Are YOU insured by the FDIC? My guess is no, you are not. I would guess the vendor of your card (netspend, walmart, accountnow, bank freedom, etc) are protected. I'm not sure, but this does make sense, since YOU DO NOT HAVE A CONTRACT WITH THE BANK THAT HOLDS THE FUNDS ASSOCIATED WITH YOUR PRE_PAID CARD. Your contract is most likely with the pre-paid card vendor. The bank holding the funds may not even know your name. Why would they care? Again, you have no written or signed contract with the bank itself. (I'm just speculating, but I think my thoughts are correct.)

I called two different banks where my money "sits" for use on prepaid cards. Both banks have no clue as to a connection between ME and the "deposit" account tied to my debit card. They both told me to speak with my "issuer" (prepaid card vendor.) In other words, they (bank) have no connection directly to me. They would not even be able to give up "an account that serves my prepaid credit card" under a court order. Why? I AM NOT THEIR CUSTOMER!. I DO NOT HAVE AN ACCOUNT WITH THEM! The bank's customer is NetSpend, Paypal, walmart money card, accountnow, freedom bank, etc. How does all this work? It is very complicated. I wrote a thread somewhere on this forum related to what is in all of this for the bank. You have ot keep in mind that the fees, etc are paid to the pre-paid card vendor. What does the bank get? I think the bank gets to "hold" the unspent money and in return this unspent money becomes part of the daily float used to finance the commercial paper that pretty much finances all of our banking needs on a day-to-day basis. We do, afterall, each and everyone of us exist financially on the basis of commercial paper.

There was a time at the beginning of this current fiscal crisis where the day-to-day issue of dealing with commerical paper came very close to shutting down. THAT, my friends would have been a catastophe.

So, don't worry about whether or not your pre-paid account is a bank account. If I were called into a debtor's exam and asked to list all of my bank accounts, I would not list my prepaid debit cards. In my mind these are a plastic version of cash, and I keep them down to a minimum. If I were asked about any cash holdings, I would be honest and state what "cash" I had available. But, this is just me. You can do what you want, and interpretations of legal matters in your state are probably far different than my state.

If a judgment creditor/attorney asks about any cash or funds on pre-paid debit cards, then I would be honest and reply with any amounts. Would they ask this? Possibly, but who freakin' cares. You generally have plenty of notice about any debtor examination, so you have plenty of time to run your "cash" down to zero.

I am not an attorney. The above is not advice. It is my own sense of how things work after spending considerable time researching the subject, speaking with CPA's, and picking the brains of legal council. If you are worried about pre-paid debit cards getting garnished, then pay for your own finanical attorney to help answer your questions.

[josephga]

I was thinking about the walmart moneycard I went to the website and its FDIC insured and they ask for your ss number. How is that any safer than a checking account, if your ss numbers tied to it