From corporate credit cards or small business loans, business debt can be difficult to manage. If it remains unpaid for long, businesses may face a serious problem: garnishment. Bank account garnishment is a legal process that helps a garnishee, often a bank, collect money from a debtor and give it to a creditor. Unfortunately, it can cause serious cash flow blocks for a company, and these problems can result in other compounded issues.
The writ of garnishment process begins with the creditor filing a lawsuit against an individual or business for an unpaid debt. However, the creditor has to obtain a judgment against you before they proceed with the process of bank garnishment. The court signs the request, which the creditor sends to the garnishee. After that, the garnishee files and answers the writ by indicating the debtor’s financial condition. The garnishee can then place a levy on the account and execute the garnishment.
This article explains more about the Writ of Garnishment and how to stop it.
What is a “Writ of Garnishment?”
A Writ of Garnishment is a court command aiming at a third party such as a credit union, bank, or an entity that the defendant entrusts their assets and who is not the creditor or debtor in a case. It requires the third party to submit the defender’s assets to the court to satisfy a judgment against the defendant. Under Texas garnishment laws, creditors with a writ of garnishment can pull directly from the defendant’s bank accounts.
Can Credit Card Companies in Texas Garnish Checking and Savings Accounts?
Checking and savings accounts are subjects to garnishment in Texas. Therefore, a creditor who goes to court and successfully files a lawsuit for bank account garnishment can have their debt settled by withdrawing funds from a savings account.
What Type of Bank Accounts Can’t Be Garnished in Texas?
Garnishment can happen in virtually any bank account, but creditors cannot seize certain types of funds. The situations often apply to sole proprietors, but funds that are exempt from garnishment include SSI deposits, student loan disbursements, veterans’ benefits, FEMA aid, and retirement benefits for the railroad, federal, and civil service employees
Financial institutions can still get a levy and freeze accounts with funds from the above sources. If a bank account receives funds from multiple sources, the bank separates the income to garnish from the rest.
How Much Can a Credit Card Company Garnish From a Bank Account in Texas?
No limit exists as to the amount a creditor can garnish from the bank account. Provided it is an owed amount, and the money in the account qualifies for garnishment, the Writ of Garnishment can pull as much as necessary.
Besides, the creditor can file extra writs to pay the entire debt where the creditor cannot take all the funds at once. That means businesses that do not work with their creditors can have their accounts frozen perpetually.
How Can Debtors Avoid the Prospect of Garnishment in Texas?
Businesses should get a notification of judgment, but there may be no explicit notification of bank account garnishment. Finance managers realize this after processing an actual garnishment or after a rebound of a critical payroll withdrawal.
However, garnishment situations can be avoided by doing the following:
Establishing a Separate Entity
Sole proprietors may be at risk of garnishment due to personal debts. Establishing a separate entity helps them protect business assets.
Filing for Bankruptcy
Companies looking to restructure their debt or potentially move out of business can consider filing for bankruptcy to avoid garnishment.
Challenging the Garnishment
After the ruling, the court usually sends a copy of the garnishment order together with instructions on how one can challenge the garnishment. But if you decide to challenge the garnishment, you must act quickly to beat the set timeline for filing a claim for exemption.
Making Payment Arrangements
Making payment arrangements with creditors is the best way companies can avoid ban account garnishments. In fact, it can even result in negotiated balance.
Seek Legal Advice!
Businesses need to focus on their core activities, and the debt management process may pull back its efforts. Considering that bank account garnishments are unanticipated and leave businesses in a lurch, you can save a lot of resources and hassle by avoiding it.
At Warren & Migliaccio, we commit to helping debtors avoid or stop garnishments. Contact us today for legal assistance.