Exempt funds

[GoingDown]

Adding another link to this on-going discussion about pre-paid debit cards...

http://www.bkforum.com/showthread.php?75257-Is-having-a-reloadable-personalized-debit-card-the-same-as-having-a-bank-account

[GoingDown]

I have not been served, however, this has been filed in the courts here in AZ. At this time can I negotiate payment with NCI /Chase or how do I proceed. I also need some help with responding to the 20 day letter. Knowing the process would be extremely helpful from those who have been served by this company. NCI/Chase
Thank you for any help with this stressful matter. I have no assets just my paycheck.

You have nothing to lose but 25% of your paycheck, and anything in your checking account / savings account, etc.

What are you hoping to accomplish by fighting this in court? It is very unlikely you will actually win against a creditor or junk debt buyer in court. Arizona recently raised the court costs, so it gets very expensive to file written answers in Arizona courts. If you need to buy yourself some time before you file bankruptcy, I would go to a local paralegal and have them draft a written answer to the lawsuit and a motion for continuance (to buy some time), and then file it with the court.

If you want information about fighting them in court using rather unorthodox methods, send me a PM and I will send you a link to the information.

[bellessima]

I have not been served, however, this has been filed in the courts here in AZ. At this time can I negotiate payment with NCI /Chase or how do I proceed. I also need some help with responding to the 20 day letter. Knowing the process would be extremely helpful from those who have been served by this company. NCI/Chase
Thank you for any help with this stressful matter. I have no assets just my paycheck.

[GoingDown]

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.

[2scared]

I imagine you are going to a different bank to open a new acct; course with
your letter and keeping less than 2 months of SS should be enough. Let me
know how it all works out. The two CA's I'm working with haven't attempted
any nonauthorized withdrawals and the last cc's CA quit bugging me for
awhile, but I'll have to answer the phone soon. I live with other people who
have their coll calls, too, so it's fairly constant. I wonder if you can get
your credit report every yr by calendar year or is it 1 yr in length. I'd like
to find out if the one creditor reported payment by now.
Good Luck!
2scared

[alltappedout]

Hi 2scared - yes it was after May 1, but the account was not for direct deposit of SSI, so not protected. I've filed a claim with the sheriff's office and we'll see what comes of that. Next, I will open a new Soc Sec direct deposit account, and I will keep only SS direct deposit funds in the account and less than 60 days of deposits. I will write a letter to the bank manager stating that the account is SSI direct deposit account and have the manager sign a copy of the letter.

Advice I have gotten from fellow posters. I don't think they check credit to open an account and the gov't. is good for the money, so I don't anticipate any problems. Just need to have the letter on file that it is indeed a "SS direct deposit account only"; that no other funds will be deposited and that it is protected.

best wishes
Ali

[2scared]

That's really rotten that they went in to your acct and then you were charged by the
bank, too. Not supposed to happen, according to that new ruling and the bank can't
charge. Was this after May 1st? Just curious..

It seems my bank, which is limited to mainly my state and a few other locations, has no
idea about the new ruling in regard to SS. I'm glad to have heard of it, but wonder how
easy it is to sign up with a new bank when my credit has been affected.

I kept calling the collection agency that I had take the money out (a one time amt) and
the collections manager said they could not send me an email confirming payment until
30 days after the electronic payment came out....yet, he said the original creditor is
usually good about reporting it quickly to the credit bureau's, within 3-7 days. This is
the collection co., Valentine and Kebartus, that has had so many violations and a bad
rep. Dealing with another collection firm that appears to be more professional, as I did
get an email confirming the 1st payment, but I still feel nervous about them as they have
gone into people's accts without permission by saying they weren't paid enough or then
asking for the balance later. Those reports are older, however, and perhaps they are
playing it more professionally.

2scared

[alltappedout]

Thanks WhatMoney for posting the May 1 Federal regs link and for spelling out what it does. I'm just entering into BK Ch7. Had a credit union account raided of $27 and charged with $35 processing fee. Not a direct deposit account, but am going to open a new SSI direct deposit account with another bank and now know how to do it right to protect myself from further $eizures. Very helpful info, stuff the lawyer wasn't super clear about!

alltappedout

[2scared]

I just talked to a customer service rep on the phone yesterday, who knew nothing about this new federal law of May 1st protecting SSDI funds
of 60 days. I guess I'll have to get to my bank an hour or so away (get direct deposit of SSDI) and just started getting it a few months ago.
I'm having a hard time getting any paperwork from a third party collections that never sent me paperwork, but pressured me to pay on the
phone a one time payment after sending me an email with the terms. This co, I've read, has had tons of complaints of taking out more payments,
but I didn't know to google it until after the fact. The payment went through and now they won't answer my phone calls or return my messages!!
The customer service rep said I'd have to just dispute it,if they did attempt to take out more and then close my acct. which I hate to do as
I've had it a long time in good standing. Since I've started getting SSDI, I have not had any other type of money go in, not that I had much
for quite awhile.

[GoingDown]

I'm adding another link to similar thread, about a credit union's response to exempt funds...

http://www.bkforum.com/showthread.php?68632-Got-this-e-mail-back-from-my-Credit-Union-about-protected-funds

[GoingDown]

I am adding a link to this thread for those who are looking for information about JOINT BANKING ACCOUNTS AND GARNISHMENT

http://www.bkforum.com/showthread.php?68583-Joint-Banking-judgement-against-1

[GoingDown]

Thanks for taking the time to respond. This is very useful information for anyone who has exempt wages, and I'm glad this is now a "sticky" so people facing this situation in the future will be able to easily find this information.

They can now read through all the information and make an informed decision for themselves.

[WhatMoney]

Your questions are listed in bold below.

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.

The interim final rule defines the lookback period as a two month period beginning on the date preceding the date of the account review. The two month lookback period will ensure that in almost all cases, the protected amount will include two benefit payments, as urged by consumers and consumer advocacy groups. The Agencies conducted research on Federal benefit payments covered by this rule over a 7 year period that showed that a 60 day lookback period will capture at least two payments in 95% of cases, whereas a two month lookback period measured date-to-date will capture at least two payments in 99% of cases.

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.

[GoingDown]

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.
--------------------------------

.

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

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

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

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

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.

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.

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.

[WhatMoney]

Federal regulations protecting bank accounts from levy of exempt government deposits

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.