Bank Account Frozen By Capital One

Posted on August 27, 2008
Filed Under debt |

In Virginia, a creditor can list your bank account as a garnishee and freeze the funds in your account until the court date. They do not withdraw any funds but they hold all funds up to the amount of the debt until the court date.

I recently recieved a summons for a judgment from Capital One. I was in negotiation with them regarding the debt and the court date was several months away. The bank was listed on the summons as a garnishee and they imediately froze all the funds in my account. This happened at the first of the month and I had been able to deposit enough to make my mortgage payment and sent the check off. The check to the mortgage company bounced and it was then that I discovered that all my funds had been frozen.

I was shocked that they could freeze funds prior to the judgment being issued and it created a considerable hardship as I could not afford to either pay Capital One OR to make my mortgage payment check good. I liquidated my small emergency fund and have still been struggling to catch up.

I made it really easy for them as I had been making payments from my checking account and they had the bank name and account numbers. This may be the straw that breaks the camel’s back. With barely enough income to make my mortgage payment and household bills, the freeze on my account has caused me to be unable to pay them and they are all now behind.

The Garnishment Rules

From the research I have done, creditors can do garnish the following:

25% of your disposable earnings. This basically means if they list your employer as the garnishee, your employer has to send them 25% of your wages each pay period.

Any amount from your bank account, if they list your bank as a garnishee, they can freeze your account up to the amount of the debt. In Virginia, apparently they freeze these funds even prior to the court date of the garnishment. If you are having your paycheck direct deposited, they will freeze the entire amount that is deposited until they have reached the amount of the debt.

Some Money is Exempt

There are certain types of funds that are exempt from garnishment and notifying your bank that the funds are from one of these sources should release them. If you put these funds in the account with your regular income, however, the bank may have difficulty determining which funds are exempt and which aren’t.

The exempt income is as follows:

Most government benefits, including Social Security, unemployment insurance, veterans’ benefits and public assistance
A percentage of your earned wages, which varies by state
Alimony or child support payments, and other payments for the support of a dependent
Proceeds of the sale of property which is exempt from collection, such as a homestead exemption
Disability or unemployment benefits from your employer
Workers’ compensation
Retirement benefits, such as pension or annuity payments
Life insurance benefits due to the death of an insured or for wrongful death claims
Payments due to personal bodily injury, in an amount that varies by state
Proceeds of guaranteed student loans

If you are behind on any debts, set up a separate account for any of the above types of income. This will make it easier to protect them from garnishment. If you have had your bank account frozen and you are receiving any of these types of funds, you need to take a letter to the bank detailing the kind of funds you are recieving and the amounts. If you are not receiving any of these types of funds, your only option is to try to negotiate with the creditor.

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Comments

11 Responses to “Bank Account Frozen By Capital One”

Bouncing Betty (11 comments.) on August 27th, 2008 9:32 am

That just stinks. That really stinks. I can’t believe that you were in negotiation, paying what you could and they slapped you with a judgement lein and then froze your bank account. No wonder they call them “Crapitol One”.

Did you bank send you a notice about the freeze? Makes me want to put all my money in a Mason Jar and store it on the top shelf in my kitchen.
cindys on August 27th, 2008 11:06 am

The bank sent the notice and I got it about 4 days after they had frozen the account. I must admit that at the moment I am keeping more cash on hand than in the bank.
marci on August 27th, 2008 11:34 pm

Thanks for the listing of what cannot be garnished - I knew there were exemptions, but not what they were all for.

Along with an emergency fund in a bank, I seriously recommend a cash emergency fund in a fire proof box at your house or somewhere safe. Sometimes only cash will do - and if it’s cash cash, and no one knows where your emergency cash stash is, then they can’t get to it.

Good luck with working thru this one.
marci on August 27th, 2008 11:35 pm

PS - part of the last of the post seems to be missing….??
Philip Brewer (1 comments.) on August 28th, 2008 3:20 pm

The Treasury is on two sides of this issue. They want the system to work (for people who are owed money by people who have it but won’t pay). But they spend large amounts of money sending checks to people who won’t accept direct deposit–because they’re subject to garnishment and if they had a bank account, it would just be frozen.

They’re working on coming up with “best practices” for the banks, so that they can be sure to leave unfrozen any amount that’s exempt.

They also have an interesting stop-gap, until that’s done: Direct Express.

I wrote a bit about it here:

http://www.wisebread.com/making-direct-deposit-safe-for-the-garnished
luz (1 comments.) on September 3rd, 2008 4:41 pm

This royally sucks. The same happened to us. We had been saving money to pay off medical bills we knew we’d have at the end of the year from the birth of our baby and they took it all. Absolutely, all of it. Needless to say we are stressed out. With child care costs and vehicle expenses through the roof it isn’t cost effective for me to work outside of the home. Not to mention it would just give them more to take. I’m trying so hard to find a way to make money from here, but I’m coming up empty handed. I know the stress isn’t good for my baby, but I don’t know what to do.
Pays to live green (2 comments.) on September 4th, 2008 8:46 am

That really sucks that they were holding your accounts. I have had problems with HSBC freezing my account when I tried to do something they didn’t like. Banks are all the same and only care about making more money. Good luck and hopefully you can work through everything fine.
Denise (15 comments.) on October 1st, 2008 9:13 am

Your last entry was so long ago I’m beginning to worry about you. I hope you’re doing okay. I enjoy your blog and miss reading it!
cindys on October 1st, 2008 9:58 am

Denise, I have had a rather eventful summer and my focus has been on other parts of my life but it’s time to get my focus back on my financial life again.
Ben Searcy on November 8th, 2008 5:07 am

I have had my Wachovia checking account frozen. I had $100 in my account and they garnished it for $5000. My account is frozen at -$4900 and I don’t even have overdraft. My court date is set for December 11 and I could possibly scrape $1000 before the date. I have not been able to contact anyone at Capital One outside of India on this matter. I would like to offer my $1000 olive branch before the court date but maybe I should spend it on a lawyer instead or wait for court verdict. I owed $5000 to Capital One and $5000 to VISA at the same time. I just paid off VISA on a payment plan with no problem. Capital One was harassing me and even calling my family and I stopped payments…thinking about declaring bankruptcy instead of enduring harrassment….What should I do if I want to pay $1000 before court date and then pay $200 a month as I did with VISA…They won’t impound my car will they? The bright side of this story is that as I was pulling up to the drive-up window to deposit $3000 cash I asked for an account balance just for curiosity and spotted the hold and left the bank with all my cash and immediately gave cash to my friends to write checks to pay off all my bills…Whew! that was close!

What will the court do on the hearing date?
cindys on November 8th, 2008 9:49 am

There should be a contact person and number on the warrant in debt. I would call them and try to work out payment arrangements. In my case, because they had already gotten the hold, they would not negotiate the payoff any lower until after court.

For an amount that large, you might be better off talking to an attorney regarding what will happen in court. If you do not go to court, the court will grant them the judgment.