Levying a Prepaid Debit Card!

[aaj67]

Hi..

I'm anticipating a default judgment. My income is exempt (public employee disability retirement). However, a judgment creditor can still levy my bank account, as a result, I might lose access to my account until the court determines that the money is exempt. So to avoid this I'm thinking to use a prepaid debit card such as Walmart or Greendot. I understand that they still can levy a prepaid debit card, but! If the issuing bank is out of state don't they have to go thru the procedures to domesticate the judgment to be able to serve it on the bank that issued the prepaid debit card?? If so, is that a simple procedure or is it time/cost consuming?

[AngelinaCatHub]

Hi..

I'm anticipating a default judgment. My income is exempt (public employee disability retirement). However, a judgment creditor can still levy my bank account, as a result, I might lose access to my account until the court determines that the money is exempt. So to avoid this I'm thinking to use a prepaid debit card such as Walmart or Greendot. I understand that they still can levy a prepaid debit card, but! If the issuing bank is out of state don't they have to go thru the procedures to domesticate the judgment to be able to serve it on the bank that issued the prepaid debit card?? If so, is that a simple procedure or is it time/cost consuming?

I believe you to be accurate. There was a question on this subject just recently. I didn't read the whole thread but do a search. Now, before they can even serve to produce on any entity, they have to sue, get a Judgment and then sue again against the Judgement for the right to depose you as to what assets you hold. I doubt they would go through all that, and if they did, they would not have to serve the other States bank, as you would be under oath to tell them all about your assets in a deposition. I hope that helps with your concern. 'Hub

EDIT: Do they know your bank? Unless they do what is mentioned above and get a writ to levy, you can do what you wish and no one can make you tell them what assets you have.

Why don't you respond to the hearing and answer the suit? At that time, you can let them know of your un-collectability.

[ValleYum]

Here you go (I remembered the forum member's name so it was an easy search):

http://www.bkforum.com/showthread.php?75502-Wal-Mart-money-card-a-way-to-dodge-a-judgement

Hope it helps!

[aaj67]

they would not have to serve the other States bank, as you would be under oath to tell them all about your assets in a deposition.

Thanks for your reply. But even if they get the information from me about the debit card, I would think they still have to serve the bank that issued the debit card to get the money. My income is exempt anyway, so by that time they'll know that it is exempt..so they should not try to get it..

[aaj67]

Here you go (I remembered the forum member's name so it was an easy search):

http://www.bkforum.com/showthread.php?75502-Wal-Mart-money-card-a-way-to-dodge-a-judgement

Hope it helps!

Thanks

My question was specifically about whether or not they need to domesticate the judgment, and is it cost/time consuming to do so..

[AngelinaCatHub]

Thanks for your reply. But even if they get the information from me about the debit card, I would think they still have to serve the bank that issued the debit card to get the money. My income is exempt anyway, so by that time they'll know that it is exempt..so they should not try to get it..

That's true, and it would be easy to do. So, like chicken soup, it may not work, but it will not hurt. For fun though, I would respond to their suit. I know, a bit weird that I would call that fun, but you learn a lot when doing so and you just may win, or give them a bit of hassle. They may just call it too expensive to continue the action and drop it. How much are they suing you for? 'Hub

[aaj67]

That's true, and it would be easy to do. So, like chicken soup, it may not work, but it will not hurt. For fun though, I would respond to their suit. I know, a bit weird that I would call that fun, but you learn a lot when doing so and you just may win, or give them a bit of hassle. They may just call it too expensive to continue the action and drop it. How much are they suing you for? 'Hub

About $6,500

[GoingDown]

Thanks for your reply. But even if they get the information from me about the debit card, I would think they still have to serve the bank that issued the debit card to get the money. My income is exempt anyway, so by that time they'll know that it is exempt..so they should not try to get it..

The odds of them calling for a deposition or a debtor's exam over such a small amount of money are extremely low. So low that I personally would not worry about it.

Just think of all the costs involved-- they have to pay the court fees for the debtor's exam, they have to pay the process server fees to serve you with the debtor's exam summons, they have to pay through the nose for the attorney to sit there and ask you questions, they have to pay a court reporter to record what you said and transcribe it. It would cost them more than they would get out of it. It won't happen, so stop worrying about it.

Now, take some time and read the "STICKIES" above. They have all the information you need and these same questions have probably been asked and answered a thousand times by now.


This one, for example... http://www.bkforum.com/showthread.ph...1-Exempt-funds

[aaj67]

The odds of them calling for a deposition or a debtor's exam over such a small amount of money are extremely low. So low that I personally would not worry about it.

Just think of all the costs involved-- they have to pay the court fees for the debtor's exam, they have to pay the process server fees to serve you with the debtor's exam summons, they have to pay through the nose for the attorney to sit there and ask you questions, they have to pay a court reporter to record what you said and transcribe it. It would cost them more than they would get out of it. It won't happen, so stop worrying about it.

Now, take some time and read the "STICKIES" above. They have all the information you need and these same questions have probably been asked and answered a thousand times by now.


This one, for example... http://www.bkforum.com/showthread.ph...1-Exempt-funds

I would like to make it clear that I did search before I posed my question. Again, the thread you posted a link for did not address my question, I read it before starting this thread. My question was not asked and answered a thousand times. My question had to do with domesticating a judgment to serve the bank that issued the prepaid debit card.

Here is my question that I posted on my initial post: "If the issuing bank is out of state don't they have to go thru the procedures to domesticate the judgment to be able to serve it on the bank that issued the prepaid debit card?? If so, is that a simple procedure or is it time/cost consuming?"

[lotsahats]

Hi..

I'm anticipating a default judgment. My income is exempt (public employee disability retirement). However, a judgment creditor can still levy my bank account, as a result, I might lose access to my account until the court determines that the money is exempt. So to avoid this I'm thinking to use a prepaid debit card such as Walmart or Greendot. I understand that they still can levy a prepaid debit card, but! If the issuing bank is out of state don't they have to go thru the procedures to domesticate the judgment to be able to serve it on the bank that issued the prepaid debit card?? If so, is that a simple procedure or is it time/cost consuming?

Are you sure your bank account can be levied? It's my understanding (and, anybody, please correct me if I'm wrong), that if 100% of the money going into your account is exempt, then they can't touch it. However, if you have additional funds being deposited from a non-exempt source, then it can be levied.

If my understanding is correct (and I'm not positive that it is), then you may not have anything to worry about.

[aaj67]

Are you sure your bank account can be levied? It's my understanding (and, anybody, please correct me if I'm wrong), that if 100% of the money going into your account is exempt, then they can't touch it. However, if you have additional funds being deposited from a non-exempt source, then it can be levied.

If my understanding is correct (and I'm not positive that it is), then you may not have anything to worry about.

I contacted the office of the clerk of the court, I was told that the affidavit claiming exemption can only be filed after the writ of execution (levying the bank account) is issued, which cannot be issued until they get the judgment. In other words, it is my understanding that the plaintiff would have no way of knowing that the money in my bank account is exempt until I file the claim of exemption.

[GoingDown]

I would like to make it clear that I did search before I posed my question. Again, the thread you posted a link for did not address my question, I read it before starting this thread. My question was not asked and answered a thousand times. My question had to do with domesticating a judgment to serve the bank that issued the prepaid debit card.

Here is my question that I posted on my initial post: "If the issuing bank is out of state don't they have to go thru the procedures to domesticate the judgment to be able to serve it on the bank that issued the prepaid debit card?? If so, is that a simple procedure or is it time/cost consuming?"

Here is some of the info you would see in the stickie I directed you to:

I am going to add another link here about pre-paid debit cards. Although they are not technically exempt from being garnished, they are safer than checking accounts...

http://www.bkforum.com/showthread.php?73014-Pre-paid-Moneycard-from-Walmart&p=543062#post543062

Here is a quote from that link...

"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."

The key to remember here is this: the judgment creditor will probably never know that you have a pre-paid debit card UNLESS YOU TELL THEM. This is why you should never talk to debt collectors on the phone, but if you do, please don't give them any information about stuff like this. They will just turn around and use the information against you.

And as a rule of thumb... never keep more money in any account-- including a pre-paid debit card-- than you can afford to lose once someone files a lawsuit against you. Use them for convenience to pay certain bills online, if you so choose, but don't keep huge balances on them.

And always keep in mind that there are other alternatives to use to pay for things online. For example, you can buy Amazon gift cards at many grocer stores using cash, for no fees, and then use them to buy things online. You don't need a debit card or visa card to do that.

Pay special attention to this part:

"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."

If that one company has registered agents in 40 states, there is a very good chance that there is a registered agent in your own state for whatever pre-paid debit card you choose, and so domesticating a judgment to levy a pre-paid debit card is not necessary in most cases.

So, to answer your question, is it much of a hurdle for them? No. It is not.

Domestication of a judgment, in the unlikely event they actually needed to do that is a very simple matter as well. So, even if they had to do that, it would not be a big deal for them to do it.

But you're missing the forest for the trees. They first have to find out that you have a pre-paid debit card. And until you tell them about it, they probably won't know. And as the article stated, most debt collectors aren't even interested in finding them in the first place, for the reasons already discussed in the old stickie.

[GoingDown]

I think these quotes may also be helpful for anyone reading this looking for answers...

If all of your income is EXEMPT, then you may not need to bother with a pre-paid debit card in the first place... read on...

Finally! Effective May 1st, 2011 there are new Federal regulations protecting all bank accounts from a levy of exempt government funds. It also prohibits banks from taking any "legal fees" or other fees from the protected exempt funds. Basically the last 60 days of exempt direct deposit funds are protected from a judgment creditor garnishment order - the bank MUST determine if the account contains exempt funds and refuse to freeze those exempt funds.
--------------------------------

A new federal rule that strengthens protections for bank accounts used to collect federal benefits is welcome news for retirees, veterans and disabled persons, according to a lawyer for the National Consumer Law Center.

The “interim final” rule was issued February 23, 2011, and will take effect on May 1, 2011. It will limit creditors’ ability to freeze and take funds from accounts that contain Social Security, Supplemental Security Income (SSI), VA and other federal benefits. These benefits, which are legally protected from court-issued garnishment orders, are critical to the survival of many recipients.

“We applaud the work of the Treasury Department and the other agencies to safeguard these essential benefits, and the leadership of Sen. Max Baucus on this issue,” said Margot Saunders, an attorney with the Center. “All too often, elders, veterans, and disability benefit recipients who rely on these benefits for their basic needs have been unable to access them for extended periods because of creditor-imposed garnishment freezes.”

Social Security, Supplemental Security Income (SSI), VA, and similar federal benefits are intended to meet beneficiaries’ daily needs. Federal law makes these funds immune from seizure by creditors.

But in practice, creditors frequently obtain court garnishment orders so that banks then freeze bank accounts containing protected funds. A beneficiary may be unable to access urgently needed funds for weeks or months.

Often, the paperwork and procedures needed to end an illegal freeze prove too daunting for a recipient, so that a bank turns over supposedly “untouchable” funds to a creditor.

The new rule prohibits the practice of denying beneficiaries access to these essential funds in bank accounts. It requires all banks to determine whether an account contains protected funds. If an account contains protected funds, the bank is required to protect two months of benefit payments from garnishment. Protection of more than two months of benefit payments requires additional court filings by the beneficiary.

In announcing the rule, the agencies stated that its framework could be expanded in future years to protect other federal payments such as military retirement.

“There are still many other steps that need to be taken to make bank accounts safe,” Saunders said. “But this new rule will give peace of mind to many elders, veterans, and disability benefit recipients.”

http://www.consumeraffairs.com/news0...-benefits.html

The analysis and all regulations are published here:

http://www.federalregister.gov/artic...-payments#h-12

The battle for Federal regulations to protect exempt government benefits from illegal seizure began with congressional hearings in September, 2007. Nearly four years later they will be a reality.

AND...

GD, all of your questions/concerns were answered in detail in the references I provided. But I'll try to answer your questions anyway.

What if the checking account has 61 days of exempt direct deposit funds?

The purpose of these rules is protect two months of exempt income. Most government programs direct deposit on the same day of the month every month. The actual rule looks back two months based on the day preceding the day of review by the bank. So for two 31 day months, the lookback period would be 62 days.

For example, the bank receives a garnishment order on Sept. 1. They process the order on Sept. 2, they are allowed 2 days to process. They look at all exempt deposits from midnight on July 1 to midnight on Sept 1 (62 days) to determine the protected amount. Any deposit on Sept. 2 is not part of the levy, since the levy is only good for the day it was received by the bank. The protected amount is whatever money is on deposit on Sept. 1, up to the two month limit.



Wouldn't you have to withdraw any money deposited before the last 60 days?

Any amount of money that exceeds the two month lookback is not protected. So yes, if you wanted to avoid the usual court exemption process for removing a banking freeze and garnishment of your exempt funds, you would not leave more than two months income in your account.

And who determines this? Someone at your bank? The court?

The bank determines the amount of protected funds, based on these very specific rules. Each ACH exempt transfer will be encoded with an "XX" in the header name, so anyone that can recognize XX can easily determine the protected amount. In reality the banks are already modifying their programming to make this process automatic. It's estimated that 95% of all banks will have this process automated by the time the rules go into effect in May.

The courts have nothing to do with this - that is the whole idea of the new regulations - to keep the court exemption process out of the picture. The banks also have a safe harbor protection against any court action. The bank only needs to notify the depositor and the court that the funds were exempt, and hence the garnishment was rejected. The judgment creditor does not need to be notified by the banks why he didn't get his money. I like that part.

Does it say anything about what fees the bank is allowed to charge you for responding to a court order (garnishment)?

Yes, the banks will not be allowed to charge any fees to the account holder for responding to the court order, unless there is unprotected money in the account. If a couple receives $4000 in social security over a two month period, then only funds over the $4000 will be subject to any bank fees.

I know my last checking account was at a bank which explicitly stated in writing that they would charge a fee of $75 just for responding to a court order such as a garnishment. I have heard of some of them even charging their attorney's hourly rate for responding to the court order, which can easily wipe out a small checking account balance.

Times are changing GD. There will be no bank fees or attorney fees that can be taken from the protected amount of funds in the account.

Your bank still has to fill out paperwork and respond to the court. They often have their lawyer look at it and respond to it, and well, they have to pay someone to do these things.

So what? First the process will be automated so the janitor could handle the paperwork. The account holder is the victim here, and should not be charged for someone else attempting to break the law. These new regulations are clear and fair. A bank can always close your account after you receive a garnishment, claiming you are not a profitable customer. There will always be another bank around the corner willing to take your US Treasury direct deposits. An impact analysis was done on how these rules would affect smaller banks and credit unions, for example. And it was determined that there would be no measurable effect on their profits. You can read all about all the 500+ questions these Agencies considered before this final rule making. These regulations were carefully researched after banking industry feedback, and the banks generally agree that this kind of system to prevent abuse of the disabled, the elderly, and veterans, was needed.

While it is a step in the right direction, I would still be wary of ever leaving more money in a checking account than you can afford to lose, once you have a judgment against you.

That's up to you. You won't lose two months of exempt direct deposit funds no matter how wary you are. You don't have any exempt funds, and being younger you don't mind the inconvenience of an all cash underground lifestyle. Seniors in their 70's and 80's and 90's should not have to put up with that kind of crap. This law gives some peace of mind to retirees, the disabled, and veterans who depend on their exempt monthly government benefits to survive.

These new regulations also do not require a depositor to notify a bank in advance that their deposits are exempt. The exempt status is clear from the ACH coding, and the banks only have to follow the regulations from the regulatory agencies that determine the banks existence.

Also, these rules will trump any state laws about multiple day garnishments. The garnishment can only be effective on the day the bank receives the court order. No further days of levies will be honored if the account has exempt deposits. This is already the case in Oregon, but in some states the creditor can keep stealing exempt funds after the first day using the original garnishment. The states will need to change their statutes now to make this multiple day levy of exempt funds illegal.

These federal regulations are the minimum requirement to protect exempt funds. If a state has further rules that provide more protection, then the state rules still apply. In my state the protection goes up to $7,500 per account holder, for example.

One last thing I was thinking about when you said you were worried about not having access to your checking account while the matter was settled, is that maybe it would be a good idea to withdraw enough cash for an emergency fund and keep it safely hidden somewhere in your house.

[aaj67]

I think these quotes may also be helpful for anyone reading this looking for answers...

If all of your income is EXEMPT, then you may not need to bother with a pre-paid debit card in the first place... read on...

Thanks for the detailed explanation..the reason I'm worried is that the new federal rule banks must follow might not apply to my exempt income type. It's not social security benefits, it's a public employee disability retirement, it's not federal benefits.

[underwater59]

The odds of them calling for a deposition or a debtor's exam over such a small amount of money are extremely low. So low that I personally would not worry about it.

Just think of all the costs involved-- they have to pay the court fees for the debtor's exam, they have to pay the process server fees to serve you with the debtor's exam summons, they have to pay through the nose for the attorney to sit there and ask you questions, they have to pay a court reporter to record what you said and transcribe it. It would cost them more than they would get out of it. It won't happen, so stop worrying about it.

Now, take some time and read the "STICKIES" above. They have all the information you need and these same questions have probably been asked and answered a thousand times by now.


Exempt-funds[/url]

You would be surprized as my wife just has had them file for a debters exam on less then 6500 dollers, in her name only the joke is on them tho once she actually gets the notice to appear as her income is ssd and no assets that are not exempt.
i am assuming it will be my turn shortly for a debters exam as they got there default now only thing i am concerned about is paypal acct where i do a bit of selling