Bank Account Exempt Funds

[WaitNSee]

Question 1. How long is the "look back" on a bank account for any non-exempt funds deposited into an account?

Question 2. I've read where a refund from a store or .01 interest from checking threw out the exempt funds status. Does any one know if this is true and if so, are all funds then open for garnishment, or just the refund/interest amounts?

Everything into my account is now exempt, just wondering if I needed to open a NEW account because of a return to Wal-Mart. Something that would cost a lot more for new checks, etc., than the total refund..

[mtbc]

Exactly what do you mean by "exempt funds" in this context?

[WaitNSee]

Exempt from collection after a judgment, cash in your bank account that a judgment creditor could attempt to seize for payment on a debt. After a judgment it is my understanding they can garnish your bank account for monies to pay the debt.

My entire income is from Civil Service retirement and SS, I am just trying to be sure my bank account has not been compromised by the fact that I had a couple of other items into the account in 2009, and a refund on a return to Walmart.
Thanks,

[tigergem]

Well. You could try to argue that the refund constitutes a recapture of exempt funds. I don't know if that will fly or not. And is it worth your time and energy to argue the point? Or easier to open a new account?

[WhatMoney]

Question 1. How long is the "look back" on a bank account for any non-exempt funds deposited into an account?

Question 2. I've read where a refund from a store or .01 interest from checking threw out the exempt funds status. Does any one know if this is true and if so, are all funds then open for garnishment, or just the refund/interest amounts?

Everything into my account is now exempt, just wondering if I needed to open a NEW account because of a return to Wal-Mart. Something that would cost a lot more for new checks, etc., than the total refund..

As one who keeps a checking account for direct deposit of SS retirement benefits only, I have often asked myself the same questions. Here's the way I see it:

Answer to 1: There is no definition of "look back" time for non-exempt funds I can find. If you reduce your balance to $0.01 before the next exempt deposit, you have spent all of your exempt funds except one penny. So I feel this is how you can reset a mixed funds account to a exempt funds only account. Actually I reduce the balance to $0.00 in the account to reset it, although the bank may decide to close your account within a certain time period if you reduce the balance to zero. Depends on the bank. Resetting a week before the next exempt deposit seems safe enough. Call the bank to find out their policy on zero balances.

Even if you reset the account to $0.00 balance, and the creditor attorney finds prior non-exempt deposits of any size, he may still try to challenge your exempt status account. This will not hold up in court, but that doesn't present some of these bastards from trying it anyway, hoping you won't defend yourself.

If there are any mixed funds present because the balance is non zero before the exempt deposit, then the creditor will claim mixed funds and try to seize all the funds. This is illegal, but it's still up to you to sort out to the court which funds are exempt vs non-exempt, even if it is obvious the non-exempt portion is only a few cents in interest.

Answer to 2: Yes, any mixed funds defines the account as mixed or co-mingled funds, but the creditor is still only legally entitled to take the non-exempt portion. But the creditor attorney will argue (wrongly) that since your account has mixed funds they deserve it all. No judge will go along with this, but the creditor attorney doesn't care. An honest judge would consider sanctions and the payment of all legal fees for this kind of behavior from the plaintiff. But there are not that many honest or caring judges.

The collection attorney is betting you won't know any better and not contest their illegal seizure of your exempt funds in court, usually by filling out the exemption form. I've seen this despicable practice used on elderly seniors many times. The banks will usually stand idly by not even informing their customer of the theft of their exempt funds.

It's not uncommon to see court cases in CA where the judge has had to release exempt funds back to the depositor when the creditor attorney challenged the status of the account. In one case the account had $2,000 in exempt SS direct deposit funds and $0.47 from interest checking. The judge awarded the collection attorney the $0.47, and ordered the bank to unfreeze the remaining $2,000. Collection attorneys, the evil pond scum of the earth still continue to challenge accounts when it is clear there is no non-exempt funds of any value in the account. Why? Because they are betting on no defense challenge from the elderly depositor because of disability, ignorance of the laws, or dementia, and often all three.

The same for returns and credits to the account - you would need to prove they were from exempt funds - which would require a complete paper trail to prove in court.

I would try to not use your exempt deposit account for any transactions where you may need a refund. Usually debit refunds are in cash, but visa/debit refunds may be credited back to account in some cases. Not worth the hassle. Use cash or gift cards, or a second checking account for store transactions and keep the balance small. Pay Pal debit card (and NO PP credit card) is another possibility...

For SS there is always the collection proof SS debit card for direct deposit of your SS funds. The inconvenience factor is that to pay your rent or mortgage and other bills without ACH transfer options, you will need to obtain a cashiers check or money order from a bank for the payments. You can get these free with some senior or "silver" checking accounts.

[WhatMoney]

Since this thread is about judgment exemptions from seizure, not BK exemptions, it probably belongs in the Collections Section.