Are There Any Assets Debt Collectors Can’t Touch?

Falling far enough behind on your debts to have them sent to the collection is not a good situation to be in. Collection agencies are known to be quite aggressive – at least to the extent the law allows. They may even have the legal right to go after your assets in some cases. Needless to say, letting things get that far is not a smart idea.

If there is any good news here it is the fact that debt collectors cannot arbitrarily target your assets without first going through a legal process. And even at that, not all your assets are up for grabs. There are certain things debt collectors cannot touch.

General Debt Collection

There are two basic types of debt collection. The first is general debt collection; the second is judgment collection. General debt collection is normally the first step in collecting on things like unpaid utility and cell phone bills. Companies turn those unpaid debts over to collection agencies willing to take on the responsibility of making phone calls, sending letters, etc.

As a general rule, states do not allow collection agencies to seize assets for general debt collection. Before any assets are seized, a court order must be obtained. Such a court order is known as a ‘judgment’. Moreover, general collection agencies do not tend to specialize in collecting judgments. That is something for specialized collection agency, like Salt Lake City-based Judgment Collectors.

Assets in Court Orders

A creditor who wins a judgment against the debtor has certain tools it can utilize to collect. Among them are wage garnishment, bank garnishment, and seizure of assets. When assets are seized, most states defer enforcement to the local sheriff’s department. If you are talking something like wage or bank account garnishment, the debtor’s employer or bank would be served with the court order.

The point of all this is to say that collection agencies cannot seize assets or garnish funds without a court order in place. The creditor first must obtain a legal judgment. After that, court orders can facilitate garnishment and asset seizure. Until then, wages and assets are off-limits.

Assets Protected from Seizure

There are a small number of states that do not allow wage garnishment on civil debts. A few also don’t allow bank account garnishment. In states where bank accounts can be garnished, judgment collectors are still limited in how much money they can take from a debtor’s account. Judgment collectors are not allowed to completely drain a bank account and leave debtors with absolutely nothing.

Certain kinds of accounts cannot be frozen or garnished:

• Jointly owned bank accounts (when the judgment is entered against only one owner)
• Accounts holding federal benefits (Social Security benefits, veteran’s benefits, etc.)
• Trust accounts (e.g., retirement accounts, pension accounts, etc.).

Getting back to wage garnishment briefly, most states also limit the amount that can be taken out of a debtor’s paycheck. A debtor still has to be left with sufficient financial resources to meet other obligations.

Finally, a judgment collection agency cannot seize a debtor’s primary residence. The only time a primary residence can be seized and liquidated is in the event of mortgage default. In such cases however, banks are not sending the mortgages to collection. They are going through the foreclosure process directly. Foreclosure is an entirely different legal proceeding.

Ideally, it is wise to never let debts go unpaid long enough to wind up in collection. But if that happens, at least know that collection agencies are limited in their ability to garnish and seize assets. Those limits protect consumers to some degree.