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I have around $50k in debt, around $12k in credit card debt and $38k in student loans. I've had a rough time since graduating, unable to find a job, actually ending up homeless for a while. I haven't made a payment on any of my debt in over a year, and all of my debt has defaulted / went to collections.

I'm now beginning to clean up the mess, and for the first time in my life I'm on a written budget, and I'm going to be putting $200 a month towards an emergency fund, following Dave Ramsey's Seven Steps.

I don't have a bank account, and I'm afraid of opening one for my emergency fund for fear that my account would be frozen and my money seized for payment of past debt.

Should I stay cash only or are my fears unfounded?

Thanks.

flag	asked Jan 3 at 23:02 Derek 31●1

Frugallawyer · Answer 1 · 2010-01-04 05:38:32Z UTC

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Derek, are there judgments against you? If there are judgments, then your bank account could be subject to a writ of garnishment. I don't know where you live, so it would depend on the laws for your state. I recommend contacting the pro bono legal services for your area to determine the laws for your state. Certain types of wages may not be garnished.

If nothing has been reduced to a judgment, your fears may be unfounded. Typically, the collections agency cannot do anything until there is a judgment in place so that they can garnish your wages. I still recommend looking at the law in your area to determine whether this is true for your state. I can only base this on the law that I am familiar with.

answered Jan 4 at 5:38

Frugallawyer
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	I live in Tennessee. Nothing has been reduced to judgment, at least as far as I know. At least I have yet to be served regarding proceedings. I was under the impression that in the case of student loan debt, a judgement was not needed for garnishment or seizure? – Derek Jan 4 at 15:46
	I'm honestly not familiar with collections law for student loans. If they can garnish it without a judgment, they will do so if they can find the account. Can't give you legal advice, but it might be a good idea to call and try to negotiate terms for payments so that they don't try to garnish you. Have you looked into bankruptcy for the credit card debt? Many areas have pro bono attorneys working in the bankruptcy field. (I am a corporate litigator, so none of this is my specialty.) – Frugallawyer Jan 4 at 21:19
	To be safe, I think I'm going to wait until I consolidate my student loans under the new IBR (income based repayment) the government is offering before opening an account. Under IBR, I think my monthly payment will drop to $0. I do hope to file Chapter 7 this year, but I haven't been able to find a pro bono lawyer... though maybe I don't know where to look. – Derek Jan 8 at 5:24
	Check with the TN Bar association. Ask them to put you in touch with the pro bono legal services for your community. That is probably the best place to start. – Frugallawyer Jan 8 at 5:40
	This eventually led me to Legal Aid of East Tennessee, but they told me they only help if there are judgments against me. I have found a women locally that I like who I will be meeting with next week. I already have been told that it will cost $1300 which includes filing costs but does not include the mandatory courses I'll need to take before and after filing. – Derek Jan 12 at 17:54

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Dogfood Provider · Answer 2 · 2010-01-11 05:51:14Z UTC

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Ditto everything Frugallawyer said.

Also, you didn't mention it, but if you owe the IRS, they are very good at finding bank accounts. On the other hand, they are also awesome about working out payment plans.

Good luck!

answered Jan 11 at 5:51

Dogfood Provider
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I've found the IRS to be helpful in general. Very professional when I call with questions around tax time. – mbhunter Jan 11 at 6:34

From my calculations, the IRS owes me, actually. But I have three years of returns I need to file counting the one coming up this April 15. I wasn't particularly good about filing when I expected everything they owed me would instead go to delinquent student loans. I'm mailing my student loan consolidation application today, and I will begin working on filing once duplicate W2s make their way to me. – Derek Jan 11 at 14:31

Is it safe to open a bank account if you are under heavy debt?

2 Answers