A NetSpend account cannot protect you from wage garnishment but could potentially protect you from a levy on your account if, and only if, the creditor does not locate it. It is not the NetSpend card but your wages that are garnished. You will only receive the garnished wages.
You owe money. Can your NetSpend account be garnished? It depends on the type of garnishing.
Let’s imagine you have a debt. Can your NetSpend account be garnished to pay back your creditor?
To answer this fully, we need to take a look at the debt collection process to identify at which, if any, stage your NetSpend account could be garnished.
How Does Debt Collection Process Work?
In cases where you’ve defaulted on a loan, stopped paying your credit card bills, or run up huge medical bills, your wages cannot be garnished by a creditor unless the creditor first gets a money judgment against you.
The process is as follows:
- The creditor will phone and/or email you to settle the debt. If the debt is not settled within 120 – 180 days since the most recent payment, the creditor ‘writes-off’ the debt. Read Charge Off, Credit Report, Statute of Limitations & Merged Creditors.
- At the write-off point, the creditor transfers the debt to a late-accounts department, or has the option to sell the debt to a collection agent. The collection agent buys the debt at a discount and has the right to collect the entire balance due plus interest. A debt collector that owns a debt account is a creditor. A collection agent may use aggressive tactics, which are illegal under the Fair Debt Collection Practices Act (FDCPA). Read rights consumers have in collections under the FDCPA.
- The creditor must sue you. A court or a law firm for the plaintiff will notify you of the time and place of the hearing in a ‘summons to appear’ or a ‘summons and complaint’. See Served Summons and Complaint. Do as instructed, because if you don’t the judge has no choice but to decide on behalf of the creditor.
- Contact the law firm representing the creditor. Open a negotiation to see if they are willing to settle the debt. If the creditor is not willing to negotiate, respond as indicated in the summons.
- You can challenge the garnishment by raising an objection.
- Attend a hearing. Present any evidence to claim full or partial exemption . You can potentially stop most garnishments by filing for bankruptcy.
- If the court grants a money judgment to the creditor, this is a declaration that the creditor has the legal right to demand a wage garnishment, a levy on the debtor’s bank accounts, and a lien on the debtor’s property.
The creditor sends a copy of the court order to the local sheriff or marshal, who sends the document to your employer.
The document informs your employer of the amount to take off of your paycheck and directly send it to the person or institution you owe money to until your debt is paid off. The employer notifies you of the garnishment.
See Wage Garnishment.
If you are getting your wage sent directly to your NetSpend card, can this protect you from garnishment of your wages? No. It can’t. It is not the NetSpend card that is garnished. It is your wages that are garnished. It doesn’t matter where your wages go, you will only receive the garnished wages.
If you owe child support, alimony, student loans, or back taxes, or a court judgment has been entered against you the creditor can garnish your wages without the need for court.
You will get a written notice of the garnishment from the creditor at least 30 days before wage garnishment begins.
Your NetSpend account will not protect you.
Levy Bank Accounts
A levy means the creditor has the right to take whatever money is in your account and apply the funds to the balance of the judgment. See the Bills.com resource State Consumer Protection Laws and Exemptions.
Can your NetSpend account offer protection from a levy on your bank account?
You are required by court order to disclose the name of your financial institutions and account numbers. If you don’t disclose a NetSpend account but the creditor knows or suspects you have it, knows from which company, and the company has a registered agent in the state, the creditor could send a garnishment order. The issuer is required to comply with the garnishment order.
Although a NetSpend account doesn’t show in your credit report, it is traceable to you. A bank account exists behind the scenes and it will have FDIC insurance, which requires the card issuer to gather personally-identifying information.
Even without FDIC insurance, the card number must be linked to a person for verification. If you provided your Social Security number when you opened your NetSpend account can be located. However, it’s difficult for a creditor to identify your NetSpend account with enough certainty to justify the cost of issuing a garnishment order.
So, a NetSpend account does not protect you from a levy on it but it’s hard for a creditor to locate and garnish. There are no procedures in place for judgment creditors to access information in order to garnish a NetSpend card.
A lien is an encumbrance on a property and may prevent you from selling or refinancing until you can pay off the judgment. See the Bills.com resource State Consumer Protection Laws and Exemptions and the Bills.com Liens & How to Resolve Them.
If you sold the property before the judgment and put the proceeds in a NetSpend account the creditor cannot locate you may be able to protect it. If the creditor is aware of a recent property sale, they would be more prepared to invest in finding out about your NetSpend account.
It is not too late to contact the creditor or the law firm that either represented the creditor or bought the debt and present them with a settlement offer. See Debt Negotiation and Settlement Advice and What Are My Debt Consolidation Options?.
A NetSpend account cannot protect you from wage garnishment but could potentially protect you from a levy on your account if, and only if, the creditor does not locate it.
NetSpend accounts are traceable so it depends on whether the creditor is willing to invest time and money in doing so.