Protecting Your Funds

A collector can’t garnish anything without a court judgment. Collectors obtain a court judgment by filing a lawsuit, serving a summons and complaint, and eventually obtaining a judgment. Seniors and disabled persons normally have nothing to worry about if faced with a judgment for old debt. Collectors cannot garnish federally protected income like Social Security, pensions, VA and disability benefits. Federal banking rules also automatically protect from garnishment twice the amount of monthly Social Security deposited into a bank account, no matter the source of funds in the account at the time of the garnishment. However, sometimes persons may have extra money that is not from a protected source, such as proceeds from the sale of some asset like a home or car. If that unprotected money is held in a bank account, it could be subject to garnishment. How then can that money be protected?

Sometimes a prepaid Visa card is suggested as a means to protect money from being garnished. A prepaid Visa card looks like a credit card but is entirely different. It’s not supported by credit issued by a bank; instead, it’s paid for with cash. A prepaid card allows you to make purchases using your own money rather than borrowing money from a creditor and paying interest and fees for the privilege. It’s just like paying with cash.

A prepaid card is also as different from a debit card as it is from a credit card. When you make a purchase with a regular debit card, your bank immediately deducts the cost of the purchase from the bank account the debit card is connected to. But with a prepaid debit card, you load money onto the prepaid card until it is used up, and then add more. A prepaid debit card is like a renewable gift card. The money on a prepaid debit card is not held in a bank account with your name.

Here are two links with Walgreen’s and Walmart that show how to get a prepaid debit card and explains in detail how they work:

Walgreens Reloadable Debit Cards

Walmart Money Cards

Judgment creditors would love to be able to garnish a Visa prepaid card – but they can’t. They would first have to find out about its existence. A prepaid card does not show up on your credit report and collectors have no way of knowing if you have one. The only way they’re going to find out about your prepaid debit card is if you tell them yourself, which you would never do. Putting excess money that’s above the protected limit in a bank account into a prepaid card is like taking cash out of your account. A creditor won’t be able to locate and garnish it.

Prepaid debit cards are a relatively new concept. There are simply no procedures in place for judgment creditors to access information in order to garnish those types of accounts.

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