Card issuers need court judgments to seize debt payments

If lenders can access bank accounts, select state marriage laws may put spouse assets at risk

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Dear To Her Credit,
Can my credit card company legally remove payment from my husband’s savings account? – Joanne


Dear Joanne,
Your question has two important parts: First, can a credit card company seize a cardholder’s bank account? And second, can the credit card company take your husband’s assets to pay for your debts?

To answer the first question: It’s possible, but not common, for credit card companies and other lenders to take money from your account if you are behind on your payments. It’s not a quick or easy process, and you should have plenty of time to respond and pursue other resolutions before they get to the point of actually taking money from your account.

Credit card companies can’t take money from your account simply because you have missed a payment. After you have missed payments and the bank or collection companies have tried other ways to get you to pay, they may take you to court and get a judgment against you. Once they have a judgment, they can take legal steps to seize the amount. They can take money from bank accounts, garnish your wages, or attach a lien to real estate.

If you have received notice that your credit card company is seeking a judgment against you, be sure to respond promptly. If you dispute the debt, you should request validation in writing. If the bank has insufficient documentation, it will drop the case.

You can also fight asset seizures on the basis of exemptions. For example, if they garnish your wages, you can argue that you need a certain amount of money to live on. The amount your state allows you to keep safe from creditors is called an exemption, and it varies from state to state.

Another way to avoid having a judgment against you is to offer to settle the debt. Credit card companies would far rather receive some money than none, especially if they can save the expense of taking you to court. You will need to offer something to settle the debt, and your credit history will take a hit for paying less than the full amount.

If you have more debt than you can expect to pay, you may need to consider bankruptcy. Your husband does not generally need to file bankruptcy with you. Bankruptcy is not the easy way out, and I wouldn’t recommend it except in extreme cases. However, if you owe more debt than your annual income, you have few assets, and you cannot increase your income or find another way out of your financial difficulties, it may be your best option. Filing for bankruptcy immediately stops all collection activities, including seizure of your bank accounts, until your bankruptcy is settled.

The second part of your question is whether the bank can take your husband’s assets for your debts. Assuming your husband is not on your card, or is only an authorized user, they cannot automatically attach his assets to your debts.

However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), everything you and your husband own and all your debts are considered to belong to both of you unless you can show otherwise.

The credit card company can pursue your husband for all debts, including credit card debts, incurred while you are married, regardless of who spent the money or what it was spent on. An exception to this rule would be if you could show that you incurred this debt before you were married.

If you are in trouble with debt and worried about your bank account being seized, I recommend seeing a credit counselor in your state who can help you see all your options. A local credit counselor also should know the laws and exemptions for asset seizures where you live. Look for a nonprofit agency affiliated with the National Foundation for Credit Counseling, or the Financial Counseling Association of America.

See related: 'Injured spouse allocation' tax form can shield spouse from debt, Is widow liable for husband's debt consolidation contract?

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Updated: 01-22-2019