Exempt funds

[DYLAN150]

I found out here in Washington state there is a Washington State form for exemption of protected funds. When a judgment has been entered against the person, you fill out this form and have it filed with the court and send one copy to the bank and the other copy to the firm sueing you. You can also list all of your emempt property on a seperate sheet and must state why it is exempt. I receive Social Security and VA which are exempt from creditors.

[GoingDown]

There is a similar form here in Arizona, but that does not necessarily stop a bold judgment creditor from attempting to seize the funds in your checking account, and wait for the court to decide whether or not the funds were truly exempt. Meanwhile you may have no access to those funds, and your bank may charge you a fee just for responding to the garnishment order from the judgment creditor. And they may charge you for items that bounce because your funds were frozen.

If you want to play chicken with them on this, I suggest only leaving a small amount of cash in that checking account and wait to see what they do about it.

Just remember that anyone can claim their bank account is exempt. Some creditors won't believe you. Some don't care. Only a judge can truly decide whether the funds are exempt.

Are you willing to take that chance with your money?

Are you willing to go through the hassles of going to court to try to get the account unfrozen?

As a rule of thumb, never leave more money than you can afford to lose in a checking account once someone has filed a lawsuit against you.

[DYLAN150]

GoingDown: Yea, Your problaby right, here comes the paper checks in the mail, except the Gov't has a date of 2013 when all checks must be going to a bank or that express card like Social security has.

[WhatMoney]

There is a similar form here in Arizona, but that does not necessarily stop a bold judgment creditor from attempting to seize the funds in your checking account, and wait for the court to decide whether or not the funds were truly exempt. Meanwhile you may have no access to those funds, and your bank may charge you a fee just for responding to the garnishment order from the judgment creditor. And they may charge you for items that bounce because your funds were frozen.

If you want to play chicken with them on this, I suggest only leaving a small amount of cash in that checking account and wait to see what they do about it.

Just remember that anyone can claim their bank account is exempt. Some creditors won't believe you. Some don't care. Only a judge can truly decide whether the funds are exempt.

Are you willing to take that chance with your money?

Are you willing to go through the hassles of going to court to try to get the account unfrozen?

As a rule of thumb, never leave more money than you can afford to lose in a checking account once someone has filed a lawsuit against you.

Actually you don't have to convince a creditor your funds are exempt if your state has legal protection for the banks. It is the banks that are required to provide debtor protection against an illegal levy, by refusing to freeze exempt funds. In states where specific laws have been passed, the bank cannot freeze your checking account if the bank has a form on record that the account only contains exempt funds, and it is easily verified by looking at the deposit record.

The usual proof of exempt funds is direct deposit of social security or VA benefits into a checking account that is ONLY for the purpose of direct deposit of exempt funds. The bank legal dept simply checks that the exempt claim form is attached to your account, and then verifies all deposits are only direct from the US Treasury.

In Oregon, the banks cannot charge a legal fee if the funds are exempt. But you must file the form with the account, which is best done when you open the account, not after you get a judgment.

The whole point of these new consumer protection laws is to prevent the debtor from having to challenge the levy in court. It is the banks' responsibility to obey the law. If the bank screws up and freezes exempt funds you simply point out they just broke the law and must release them according to the state law. The debtor should never have to convince a judge or see the inside of a courtroom. The real problem is that only a few states have specific laws on the books that require banks to refuse to honor a garnishment if the funds are exempt.

[GoingDown]

Actually you don't have to convince a creditor your funds are exempt if your state has legal protection for the banks. It is the banks that are required to provide debtor protection against an illegal levy, by refusing to freeze exempt funds. In states where specific laws have been passed, the bank cannot freeze your checking account if the bank has a form on record that the account only contains exempt funds, and it is easily verified by looking at the deposit record.

The usual proof of exempt funds is direct deposit of social security or VA benefits into a checking account that is ONLY for the purpose of direct deposit of exempt funds. The bank legal dept simply checks that the exempt claim form is attached to your account, and then verifies all deposits are only direct from the US Treasury.

In Oregon, the banks cannot charge a legal fee if the funds are exempt. But you must file the form with the account, which is best done when you open the account, not after you get a judgment.

The whole point of these new consumer protection laws is to prevent the debtor from having to challenge the levy in court. It is the banks' responsibility to obey the law. If the bank screws up and freezes exempt funds you simply point out they just broke the law and must release them according to the state law. The debtor should never have to convince a judge or see the inside of a courtroom. The real problem is that only a few states have specific laws on the books that require banks to refuse to honor a garnishment if the funds are exempt.

There's the problem.

I have heard numerous people say that they thought their money was exempt from a judgment creditor's garnishment of their checking account to only later find out that their account was frozen and they had to go to court to try to get access to the money in their account again.

It has been my experience that banks do whatever a court order says, so when they get served with a garnishment order, they follow it and wait for the litigants to fight it out in court, and ultimately do what a judge orders them to do.

And some judgment creditors have been known to go after exempt funds in a checking account even after they have been notified that these funds are exempt. They just don't seem to care.

What the original poster decides to do with his money is up to him. But if it was me, I wouldn't take the chance of losing access to it by keeping it in a checking account after someone filed a lawsuit against me.

[GoingDown]

GoingDown: Yea, Your problaby right, here comes the paper checks in the mail, except the Gov't has a date of 2013 when all checks must be going to a bank or that express card like Social security has.

2013 is long time from now. You might want to look into that express card or a Walmart Money Card. The latest changes from the Walmart Money Card is that they no longer charge a monthly account maintenance fee of $3 if you have a direct deposit of a certain amount each month, so it is almost like having a free checking account if you get monthly direct deposits from Social Security. To avoid ATM fees, just go shopping at Walmart and use the card to pay for what you buy and then get cash back at the cash register for free.

[GoingDown]

Here's another example of what could happen, eventhough it is not supposed to happen...

http://www.bkforum.com/showthread.php?67277-Bank-not-returning-released-funds&p=494648&posted=1#post494648

[DYLAN150]

GoingDown: I put in for the social security express card but thats from a bank in Texas. I am now requesting other checks to come to my house. Might be a hassle but at lease I will have the $. Here is what I wondering about social security express card, couldn't this be garnished as its from a bank in Texas?

[ValleYum]

Why not use a bank in Delaware? In Delaware, a credit card company or debt collector cannot levy a bank account. The IRS,a state tax authority, or a collector for back child support, alimony or delinquent federal student loans can.

http://www.fbdel.com/pgsGen/privacyStatement.asp

[DYLAN150]

Valle: I live in Washington State, how do I get an account in Delaware? Some places here won't take an out of state check!

[GoingDown]

GoingDown: I put in for the social security express card but thats from a bank in Texas. I am now requesting other checks to come to my house. Might be a hassle but at lease I will have the $. Here is what I wondering about social security express card, couldn't this be garnished as its from a bank in Texas?

The difference is that a pre-paid debit card is not the same thing as a checking account and it is not treated the same by the financial institutions issuing it. It will never appear on your credit report or on ChexSystems. The judgment creditor would only know about it if you told them about it. If they don't know about it, they can't find it, so how could they ever try to garnish it? I would never tell them about it.

And to be on the safe side, the day your Social Security funds become available on your card, I would make any necessary utility payments with it, online purchases such as Amazon.com, and then withdraw most of the remaining money and keep it in the form of cash. You'll be surprised how much money you save just using cash. For one thing you can budget everything you buy-- only bring a set amount of cash to spend that fits your budget and when it's gone, you're done spending for that day. It has literally saved me a fortune by using cash only.

[GoingDown]

Valle: I live in Washington State, how do I get an account in Delaware? Some places here won't take an out of state check!

It wouldn't be safe from creditors anyways because of ChexSystem and it will also appear on your credit report as an inquiry. Might as well ring the dinner bell for creditors.

[WhatMoney]

GoingDown: I put in for the social security express card but thats from a bank in Texas. I am now requesting other checks to come to my house. Might be a hassle but at lease I will have the $. Here is what I wondering about social security express card, couldn't this be garnished as its from a bank in Texas?

Your social security funds are exempt by Federal and State law. The Texas bank that is contracted by the social security administration to handle social security deposit debit cards OBVIOUSLY know their Billion dollar contract is from Social Security. Therefore there is simply no way in hell the bank would illegally freeze social security funds on a debit card. The only debtors that can seize social security funds are other government agencies. A credit card debt is exempt and by definition the Texas bank knows this in advance, since they have issued you a debit card that has direct deposit of social security as the only source of funds.

You have nothing to worry about using the social security debit card, or leaving a balance on the card. Do not become unreasonably paranoid about something that cannot happen, as some on this board seem to be.

[WhatMoney]

Valle: I live in Washington State, how do I get an account in Delaware? Some places here won't take an out of state check!

You apply online like any other out-of-state bank. They send you checks and a debit/VISA/MC. I have never heard of anyone refusing an out-of-state check to pay a bill. Why do you even use or need checks? An online account provides free Bill Pay, or you can use ACH transfers. And other purchases can be done with the debit/VISA card. If you want pocket cash, get it from a grocery store when you make a purchase. Most stores allow $40 to $80 cash back every purchase. Otherwise you would need to pay an ATM fee for a cash withdrawal. Some online banks will refund you the local bank ATM fee.

As far as Delaware bank not honoring checking account levies, that is what their state statutes say, but I've yet to have this confirmed by anyone in actual practice. You would think some debtor with a credit card judgment who lives and banks in Delaware would show up here someday if their account was frozen by a Delaware bank. So far it has not happened. Do we have any BKforum members that live in Delaware?

[ValleYum]

We used out of state checks all the time from USAA and Navy Federal here in Washington state, DYLAN.

Here is an application for a Delaware bank:

http://www.fbdel.com/assets/files/AccountApplication.pdf

And a phone number to contact them - nothing like going straight to the source to ask: 888-FBD-3511