Are you wondering how to protect the bank account from creditors? For that, you need to know all about the benefits of the law that abides in your state. When the court files a lawsuit for a money judgment in favor of any party, you have to confirm it with another party. In a few cases, the losing party makes the payment for the judgment amount. If they cannot do so, the creditors or a prevailing party need to collect the amount from the debtor through various legal modes. Protection of your bank account from these parties is a significant aspect that most parties overlook.
Debtors have to keep a minimum balance in their bank account or other financial accounts to seek a reputed market positioning.
Also, the bank accounts have set a few norms for the creditors due to several reasons:
- It comprises of liquid assets.
- Every creditor is known that every debtor requires some account money for paying off the attorney fee and other expenses.
- Availing a specific garnishment from a bank account is an easy thing for the creditor.
How Can you Open a Safe and Secure Bank Account from the Creditor?
For opening up a new bank account, you need to open up a store in the state where laws protect your financial statements from creditors. In few situations, the debtor does not even need to be a state resident that protects bank accounts from garnishment.
Few states such as North Dakota, South Carolina, and Maryland protects your bank account and money from the judgment creditors. You can look out for the state that immunes your bank account from such conditions. Even the married couples can open a joint statement, which facilitates tenants for account ownership.
Here is complete information on how to safeguard your bank account from creditors:
- Details for the bank account levy- Safety of your bank account is possible only when the creditor levy can seek the importance of legal tools that the creditor might use to freeze your accounts. Several states like Florida must allow you to seize the bank accounts and recollect the money. Most of the laws will enable creditors to access the debtors account through safety vaults, bank accounts, promissory notes, money market accounts, and several other assets.
- Threat of frozen bank account- Creditors have the right to secure your frozen account as no transaction is possible through it. And the bank itself freezes the bank account from the creditor. And it is resultant from the amount owed by the business and individuals. But this is not the permanent solution. Few actions like freezing of accounts are entirely in the governance of the responsible bank. Although it is possible to make deposits to the frozen account, you cannot take out money through withdrawals or transfers from it. Financial institutions have the authority to freeze debtors’ accounts with the permission of the court. And the bank does not need to notify the account holder of the same. It is a terrible state for the account holder, and you must try to settle the issues by setting terms with the creditor.
- Garnishment or the bank levy- Next step that creditors can take to hamper your bank account is by raising a request for garnishment and levy. What does a bank levy mean? It refers to the legal action that permits the creditors to access the debtors’ bank account. Once the account freezes, creditors can move a step ahead to satisfy the debt. It is another tool for a collection that advises the employer for gathering wages through the paycheck. Nowhere is a rule that banks and creditors need to alert while making any legal judgment. They only need to present proof for garnishment. Even the department of education and the IRS are substantially using these tools for the private creditors.
- Offshore Banking- Best option for protecting the bank account from creditors is to open up an offshore bank account. And especially if you own this type of account, there is an offshore asset protection trust. There is also an LLC that takes care of the bank account, and the trustee manages it. For having this type of account with tools, a judge can also order the funds back. With this tool, even your judge cannot seize to take charge of your account in any case.
Benefits of Offshore Banking
Apart from protecting your bank account from creditors, there are several other pros of offshore banking. They can deliver you high-interest rates and help in the growth of money. With currency diversification, protection of assets is also possible. A combination of LLC (Limited liability Company) and the offshore bank account, you can create a perfect bank account protection plan.
Asset Protection Trust
The next option for bank account protection from creditors is the asset protection trust. There are various categories like the revocable and irrevocable trust. A revocable trust offers very little asset protection or limited control on assets. The irrevocable trust segregates the asset from the owner. And if any creditor creates a claim, irrevocable asset protection does not grant you permission for making any alterations at all.
Wrapping up
For the protection of a bank account by the creditors, you need to prepare yourself legally. After availing of the judgment, there are multiple things to protect yourself. Filing an early lawsuit in the creditor’s favor can generate a valid defense. By taking advice from financial experts, you can safeguard creditors and survive all the complexity of assets.