Pre-paid Moneycard from Walmart

[bcohen]

I would say that money on a pre-paid debit card (such as Green Dot, Walmart Money Card, etc.) is pretty much safe from judgement creditors. Unlike traditional bank accounts, which leave a "paper trail" by running your credit report and Chex Systems report when the account is opened, there is no independently verifiable record that you have ever applied for or own a pre-paid debit card. Therefore, even in the unlikely event of a debtor's exam, you can safely "forget" that you own such a card, just like you can safely "forget" about the cash hidden in your home. The "payload" of the Court's threat (the "penalty of perjury") should not scare you, because the asset cannot be discovered unless you are dumb enough to volunteer that information. Now if you have bank accounts, motor vehicles, real estate, or stocks/bonds/investments titled in your name, you better be truthful about those things, because the judgement creditor can and will find out that you lied.

[HHM]

Here is as close to a definative answer as you can get

http://www.**********.com/blog/2011/...-be-garnished/

Bottom line, the legal risk exists, the the practical reality is that it is rare for these cards to be garnished, but it has happened. Pre-paid debit cards are not like gift cards, there is actually an FDIC insured account backing the debit card. However, the balance on these cards tend to be low, the existence of the card is hard to discover, and the cost to garnish it prohibitive.

[karm43]

Thanks for the info!

[ByeByeCCs]

Have you looked into the Delaware option? Banks in Delaware do not allow bank account garnishment (except for government debt), thus one can have a checking account even with a judgment. One suggestion I saw on another forum was Applied Bank. I have looked at their site and it seems you can apply for a checking account online. You can then have your payroll direct deposited and be able to continue banking knowing your deposits are safe. You would only want to deal with a bank that only has branches in Delaware and Applied fits the bill. Ironically, Discover Bank also fits the bill since they have only the one branch in Delaware.

[GoingDown]

Have you looked into the Delaware option? Banks in Delaware do not allow bank account garnishment (except for government debt), thus one can have a checking account even with a judgment. One suggestion I saw on another forum was Applied Bank. I have looked at their site and it seems you can apply for a checking account online. You can then have your payroll direct deposited and be able to continue banking knowing your deposits are safe. You would only want to deal with a bank that only has branches in Delaware and Applied fits the bill. Ironically, Discover Bank also fits the bill since they have only the one branch in Delaware.

Does anyone have any actual, real experience with doing this?

Please share your experiences with us.

I would like to know if this really works or not???

[GoingDown]

Therefore, even in the unlikely event of a debtor's exam, you can safely "forget" that you own such a card, just like you can safely "forget" about the cash hidden in your home. The "payload" of the Court's threat (the "penalty of perjury") should not scare you, because the asset cannot be discovered unless you are dumb enough to volunteer that information. .

Yes, exactly!

[GoingDown]

And now to quote the info from HHM's link

http://www.**********.com/blog/2011/...-be-garnished/


:

Question:

Can pre-paid debit cards with Visa or MasterCard logos be garnished by a judgment creditor?

Answer:

Actually, YES. I had done some Google’ing on this topic and most articles were rather vague and the answers seemed more like guesses. So, I decided to go to the source. I called one of the major players in the Pre-Paid Visa/MasterCard Debit Card industry and spoke to a high ranking individual (that sounds too Woodward and Bernstein to say it like that, but oh well).

Can pre-paid debit cards be garnished, yes; have pre-paid debit cards been garnished, yes. Is a garnishment common, no. The average daily balance on these cards is around $100; so from a practical standpoint, pre-paid debit cards are not an attractive target and there are other obstacles which will discuss below.

How can these cards be garnished? In reality, these pre paid cards have an underlying account that is underwritten by a bank and that account is FDIC insured. As such, the account is linked to a specific individual. So, if the card issuer received a garnishment order, then the pre-paid card can have the funds withdrawn and paid over to the judgment creditor.

Pre-paid debit cards are different than gift cards. Gift cards, even the Visa or MasterCard gift cards, do not require personally identifying information. So, gift cards cannot be garnished by sending a garnishment order to the issuer. However, if you have a $100 Visa gift card in your wallet and show up to a post-judgment debtor’s exam, the creditor attorney can require you to turn it over and many collection attorneys will have a mobile phone application to accept credit card transactions on the spot.

However, there are two other hurdles to a judgment creditor garnishing a pre paid debit card. (1) There is no easy way for the judgment creditor to find out you have such a card, and even if the judgment creditor could find it, given the usual low balance on these types of cards, it is generally not worth the cost to issue the garnishment order. (2) The issuing institution may not have a registered agent within the state to accept service of a garnishment order. In general, a company does not need a registered agent in a state to offer a product (like a pre-paid debt card). However, given the nature of this industry, many issuers do have registered agents because a license is required to be able to transfer funds. The company I spoke to has registered agents in about 40 states.

Why does this issue even matter? For me, it was one of those questions that made me go, hmmmmm! However, some people really let their debt get seriously out of control before taking action and sometimes need to take steps to buy time, have money to live, and one tactic available is to stop using bank accounts. But some people are not entirely comfortable with going to all cash (for whatever reason) or may not be able to go all cash. So, one option is to use pre-paid cards to pay for necessary day to day expenses. So, the idea with this investigation was to assess the true risk of using pre-paid debit cards. The answer: is there a garnishment risk, yes; has it happened in the past, yes; is it likely, probably not.


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Since this question keeps getting asked over and over again, can we make this one a sticky? Then I can just refer newbies to the sticky.

[ByeByeCCs]

Going Down I can't tell you anything from personal experience on Delaware, only what I have learned. I had connections to NY so I opened an account there. Under NY EIPA each account is protected up to 1760 and if you have exempt funds direct deposited into the account it is protected up to 2500. I am only receiving exempt funds at this time so I can keep 2500 in each account and it is protected. Plus they can only make two or three attempts to garnish a year. It seems to be working out well since I see in court records the law firm that got the judgment is pretty aggressive here in Florida with garnishment and have not made any attempts on my accounts. The other advantage to having the money in NY is that it is my understanding that in order to domesticate a judgment in NY I would have to be notified--thus I would make sure I do not exceed 2500 in each account. I say apply for the Delaware account, all they can say is no.

[HHM]

I think you need to be careful, STATE exemptions/protection laws only apply to RESIDENTS of the state. Granted, if you have an account, the issue becomes a practical one of, again, a creditor identifying the account, but a particular state's laws only apply to the residents of the state.

[treehugger1]

On the other hand, in most states, a creditor or CA attorney with judgment in another state cannot simply walk in and apply the out-of-state judgment and then be allowed a writ of garnishment. They have to do a bit more work.

[HHM]

On the other hand, in most states, a creditor or CA attorney with judgment in another state cannot simply walk in and apply the out-of-state judgment and then be allowed a writ of garnishment. They have to do a bit more work.

All it is is filing out a form and paying a filing fee, not that much more