If you have not established a business entity such as an LLC or a corporation, and are doing business under your own name, it will be easier for a debt collector to make the case that you and the business are one and the same and pursue your business accounts in court.
Dear Your Business Credit,
I have a debt collector going after my business account. The credit card they are working on was a personal card never used in my business. Is this legal? – Rick
You didn’t mention which account the debt collector is going after, so I’m going to assume it is either a business checking account or a business savings account.
Your letter is an excellent reminder to anyone who runs a small business about the importance of formalizing your business and making sure there is legal separation between the owner and the business.
It is possible for a debt collector who gets a judgment against you personally to pursue your business bank accounts, but it depends somewhat on how you structured the business.
If you have not established a business entity such as an LLC or a corporation and are doing business under your own name and Social Security number, rather than an EIN, it will be easier for a debt collector to make the case that you and the business are one and the same and pursue your business accounts in court.
A debt collector would generally have to get a court order to garnish your bank account. For an overview of how this works, here is a guide from the Consumer Financial Protection Bureau.
However, if you have taken these steps to keep your business and personal finances separate, it will be harder for a debt collector to make the case that the business’s money is your own.
Check your state’s laws, and know your rights
It is important to look into the laws of the state where you live that govern debt collection, as well. That will affect how a collector can go after a debt.
The Better Business Bureau has published a list of debt collection laws by state that will get you started. If you have a question, contact your state attorney general’s office. The National Association of Attorneys General has published a list of the state attorneys general where you can find yours.
Bear in mind that debt collectors sometimes make empty threats. Just because a debt collector says they will go after your bank account, it doesn’t mean they will be able to do so successfully.
The Federal Trade Commission has published a guide on what debt collectors can and cannot do, legally speaking, as they go after a debt. I could encourage you to read it so you know your rights.
See related: Am I personally liable for a delinquent loan made to my LLC?
Consider negotiating a payment plan with the creditor
Of course, it’s stressful to have debt collectors calling you and threatening to take your assets. If you legitimately owe the debt and are looking for a way to pay it off, now would be a good time to negotiate a payment plan with the creditor.
Perhaps the creditor would be willing to reduce the amount you owe if you can pay a smaller amount quickly. Even if they won’t do that, you may be able to chip away at the debt over time and put it behind you, if you’re able to get the debt collectors to negotiate.