It can be hard to keep up with debt payments — but if you’re past due, creditors may choose to pursue debt collection. They may use in-house debt collectors or hire an outside debt collection agency to help them recoup the money you owe.
If they have taken certain steps, a debt collector can access your bank account if you’re overdue on your debt payments. However, this won’t happen without your knowledge.
Find out what a debt collector can and can’t do when it comes to accessing your bank account.
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Can a debt collector access my bank account?
Yes, a debt collector can take money that you owe them directly from your bank account, but they have to win a lawsuit first. This is known as garnishing. The debt collector would warn you before they begin a lawsuit.
“Our system would be in total chaos if people who claim to be owed money could simply take those funds from another’s bank account,” says David Krekeler, attorney-at-law at Krekeler Law, S.C. “To garnish the bank account, the collector will first have to sue and win that lawsuit.”
What a collector can’t take from your account
The good news is that a debt collector can’t take just any money from you. If they win a judgment against you, they may be able to garnish some of your wages before those funds even hit your bank account. However, it can’t garnish certain federal benefits (unless the money will go towards paying child support, alimony, delinquent taxes or student loans) or remove benefits from your account, such as:
- Federal student aid.
- Federal emergency disaster assistance.
- Veterans benefits.
- Military annuities and survivors’ benefits.
- Social Security benefits.
- Supplemental Security Income benefits.
- Benefits from the Office of Personnel Management.
- Railroad retirement benefits.
The bank or credit union where you have an account that is being accessed by debt collectors must protect two month’s worth of the eligible benefits you receive so you can continue to use that money.
Need to remove collections from your credit report? Find out how.
How much money can a debt collector take from your account?
Jay Zigmont, CFP, founder of Childfree Wealth, shares that how much a debt collector can take from your account depends on many things, from the details of the court order to your location. “If there is a court order, the court will determine what they can take from your account,” Zigmont notes.
Krekeler explained that the amount which a judgment creditor can garnish from a bank account can also vary from state to state. “For example, Wisconsin allows a debtor to exempt or protect the first $5,000 in the account and California allows $1,826 as of July 2021,” Krekeler says.
These limits are known as exemptions, and it’s important to research what the exact exemption limits in your state are.
In some extreme cases, a judgment may allow a creditor to take all of the money in your bank account. This can happen in instances where you have fully used your exemption on other accounts or assets.
“If you gave them access to your account, such as to make a payment, it is common for debt collectors to take both what you agreed to and more,” says Zigmont. “Don’t be surprised if they mistakenly take more than you agreed to, and then you are in a battle to get it back.”
He recommends sending debt collectors a paper check rather than allowing them to withdraw from your account. “Be careful giving debt collectors access to your bank accounts for any payments,” Zigmont says.
Can I open an account debt collectors can’t access?
If the debt collectors have a court order that approves them to access your bank account, there’s not much you can do to hide from them.
You can however avoid making it easy for them to access your bank account if they don’t have a court order. “If you have given them access in the past, you may want to lock or change accounts so that they no longer have your account numbers,” Zigmont says. “If on the other hand debt collectors go through court, then opening another account will not protect you.”
How to protect your bank account from creditors
Unfortunately, there isn’t too much you can do to protect your bank account from creditors if they have the court’s approval to access it. “Hiding money from the court and debt collectors can get you in trouble,” Zigmont says. Choosing to conceal your assets can lead to a federal felony, and you might even face jail time. You don’t want to dig yourself a deeper hole, so trying to hide your money shouldn’t be an option.
If you aren’t sure what your options are for protecting yourself from creditors once they’re given access to your bank account, it’s best to seek legal advice from a local attorney (state laws can vary surrounding debt collection rules and regulations). If you can’t afford to hire legal help, you may be able to turn to a local legal clinic or legal aid office that is willing to help for free.
Learn more about: How credit counseling can help you get out of debt
Frequently asked questions (FAQs)
The creditor won’t necessarily see your exact account balance. However, if the amount they need to withdraw is available and they have a court judgment that allows them to do this, they can take that money directly from your account.
Generally, debt collectors can’t access your retirement accounts. Retirement accounts set up under the Employee Retirement Income Security Act (ERISA) — such as most employer-sponsored retirement plans like pensions, 401(k) and 403(b) plans — can’t be accessed, no matter how much money you have in those accounts.
You should be careful about what information you give creditors. Creditors need court orders to access your bank account. Without a legal order, your creditor most likely does not have the right to your bank information.
