Question Is having a reloadable, personalized debit card the same as having a bank account?

[lotsahats]

I'm not sure if this is the right forum. This isn't exactly a bankruptcy question, but it is related (sort of).

This is for a friend of mine (the only friend to whom I have confided about my BK, besides you fine people). She is hiding from creditors, and is days away from a default judgement. She lives in Pennsylvania, so she doesn't have to worry about wage garnishment, but has no choice but to close her bank accounts. She is thinking of getting a Green Dot card, and having her checks direct deposited to that, but isn't sure whether something like that would be safe from seizure.

I was wondering if anybody here could answer that.

[mountanddo]

I thought about getting one of those when I was in danger of getting a default judgement before filing but was a little afraid that they might find it. I got my paper check, went to Wells Fargo to cash it as that was the bank it was drawn on and then got a Visa gift card for my bills online and got the rest in cash. Total cost per check was $12.45. I think I had to do this 3 times before my bank account was safe. I remember being told that it was very difficult to find those green dot cards to garnish them. That being said, I was still nervous and choose to spend the $12.45 for peace of mind.

[justbroke]

No. In many cases, these "deposit" accounts are not covered by FDIC insurance and are not "demand deposit accounts" (DDA accounts) under the definition and regulation of the Federal Reserve. I would be careful with the amount kept on that type of account. There are some reloadable (stored value) debit cards that actually have FDIC insurance deposit accounts behind them.

If I were to get one, I'd check with my Credit Union or local bank and ask if they carry the product and whether the underlying deposit is held in an FDIC protected account. More importantly, you should CERTAINLY research the issuer and ask lots of questions about what happens if your card is compromised!

One of my debit cards was compromised several years ago. The thief stole over $1,000, by making debit charges (non-pin charges) at various stores. The bank didn't notice... I noticed when I went to take money from my primary checking account! Then i noticed the charges after looking on-line! Luckily for me, my debit card was actually backed by a demand deposit account AND the bank had to conform with banking regulations. Within 3 days, I had a "temporary" credit placed back on my account. The bank completed the investigation 40+ days later and made the credit permanent.

Some people love these cards, but I don't trust my paycheck going to this card every month. It's just too much to need to worry about. As a "throw away" card, they can be useful!

[HHM]

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

I disagree with JB on one fact, most of these cards are FDIC Insured DDA accounts. It is possible that some aren't, but in practice most are (one reason is that if a company were offering a card in more than one state, that is interstate commerce and they will fall under the jurisdiction of federal banking regulations.). I happen to know, specifically, that GreenDot cards are FDIC insured. However, if the concern is over risk of garnishment, the risk is quite low.

As for this friend, why is showing going to the trouble, just file BK. I am not surprised, but I do wonder at the level of denial and fear about bankruptcy that leads people to totally upset their day to day life because they think the cure is worse than the disease.

[GoingDown]

It seems like this question has been asked and answered like a bazillion times on here.

Read all three pages of this... it has tons of information in it.

http://www.bkforum.com/showthread.php?67251-Exempt-funds

Just a note from my own personal experience...

I've had a judgment against me from CrapOne for years and years, and I have also had a Wal-Mart Money Card (pre-paid, reloadable debit card) for years and years. They have never figured it out. They have never seized or garnished that pre-paid debit card.

Of course, I never keep much money on it anyways, and so they wouldn't get much even if they did figure it out. And that's probably why most judgment creditors don't bother going after them. They know these cards have very low balances and usually aren't worth the trouble to go after them.

[LadyInTheRed]

One thing for your friend to keep in mind is that if the creditor subpoenas her for a debtor's exam, she will have to disclose the existence of the debit card and could be ordered to turn it over to the creditor. I don't know how likely it is to happen, but it could.

I agree with HHM. Your friend should just file BK. Hiding from creditors seems like a terrible way to live life. And living without a checking account would be a PITA.

[justbroke]

... most of these cards are FDIC Insured DDA accounts. It is possible that some aren't, but in practice most are (one reason is that if a company were offering a card in more than one state, that is interstate commerce and they will fall under the jurisdiction of federal banking regulations.).

This is good to know!

[GoingDown]

One thing for your friend to keep in mind is that if the creditor subpoenas her for a debtor's exam, she will have to disclose the existence of the debit card and could be ordered to turn it over to the creditor. I don't know how likely it is to happen, but it could.

I agree with HHM. Your friend should just file BK. Hiding from creditors seems like a terrible way to live life. And living without a checking account would be a PITA.

It's not that bad. I get by quite well, and since I don't have any credit cards, and only use a pre-paid debit card when I can't find any other way to buy something online, I have saved a lot of money. No more impulse buying. I am extremely careful about how I spend my cash. I budget everything out to the penny, use exact change whenever possible, and if I run out of cash while I'm out shopping, then that's the end of my spending for that day.

It really works well for me.

It's not for everyone, but for some people, it might help them learn to live within their means.

It is also the path of least resistance, and the easiest and cheapest thing to do. You don't pay them back. You don't pay for filing bankruptcy. You just learn to live within your means.

[NoMoreCards]

To garnish the card, a judgment would be needed right? Well, if the CA had a judgment, couldn't they just garnish the wages from the employer? In that case, it wouldn't matter where the wages were sent, as the employer would be bound to uphold the garnishment.

Just to add a bit of a twist to this line of thinking.

I see the OP is from Pennsylvania, so in this state it seems wage garnishment isn't allowed. However in most other states, this would not be a way to keep funds safe from the hounds I assume.

Learn something new everyday here, one of the reasons I love this site!!

[GoingDown]

To garnish the card, a judgment would be needed right? Well, if the CA had a judgment, couldn't they just garnish the wages from the employer? In that case, it wouldn't matter where the wages were sent, as the employer would be bound to uphold the garnishment.

Just to add a bit of a twist to this line of thinking.

I see the OP is from Pennsylvania, so in this state it seems wage garnishment isn't allowed. However in most other states, this would not be a way to keep funds safe from the hounds I assume.

Learn something new everyday here, one of the reasons I love this site!!

I see where you're going with this, but it doesn't end at the wage garnishment-- the remaining 75% of the wages become fair game once they hit a checking account. In most states, the judgment creditor garnishes up to 25% of a debtor's wages, and then also garnishes any "non-exempt" money in a checking account. The bank then turns around and charges fees for responding to a court order (garnishment order, etc.) and then in some cases charges attorney's fees, and if the account becomes overdrawn in the process, they charge overdraft fees, and NSF fees for bounced checks, etc.