Can my business bank account be levied for collection on credit card debt?
have two large outstanding credit card debts we can't afford to pay due to drop in business..
If a credit card compnay or collection agent gets a judgement against me...can they garnish our business checking account..or only ones in our personal names?
—david
Many small business owners use personal credit cards to get through slow periods. If you have credit card judgments against you personally, you are at risk of property lien, wage garnishment, and bank account levy.
For more detailed information on this topic, see this article.
A bank account levy against a business account is possible if the account is a DBA “your name” or something like that, and where your SS# is attached etc.
When you set up the account was it with an EIN # or your social?
How is the business structured, C or S corp, LLC, partnership, other?
Can you provide more information about the current status of your unpaid credit card debts, who you owe, the balances, who is now collecting, have you been sued, is there a judgment currently?
What state do you live in?
If you answer these questions in a comment reply below I can provide more than just general feedback.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry, and is a regular contributor to several personal finance websites.
Hello,
I live in Maryland and have 9 charge-offs; 8 personal unsecured credit cards, 1 auto loan and 1 student loan. They all were charged-off around the same time a year ago (end of 2019). No lawsuits that I know of…yet.
The credit cards debt ranges from $3,000 to $21,000 for each one. The student loan is around $36,000. The auto loan is around $11,000.
Total is approx $112,000.
With that said, I’m about to accept an offer for employment and wanted to start an LLC, as well (for the intended purpose of conducting business, but also as a way to potentially shelter myself if a personal lawsuits are served). Definitely not looking to be fraudulent, but I would be continuously funding the business by adding leftover disposable income from each paycheck (while keeping a small portion in personal accounts, at any given time).
Question is; Would this be an issue IF one or all of the collections agencies filed a lawsuit against me for my personal debts? Any added funds would be kept in the business and not used for personal usage.
And I would be setting-up an LLC with an EIN # in the state of Maryland. Also, regarding the LLC setup, it’s inevitably tied to your name somehow for tax purposes, no? Just trying to understand what you’re saying about the difference between using your SSN vs EIN and having your name attached to the business.
Hope that makes sense.
Thanks for your time. Appreciate the help you have provided others on this website.
Are those student loans federal?
Has the car been repossessed or turned in?
If you are sued by any of those creditors withing your state SOL, which is 3 years in Maryland, that could lead to wage garnishment and a property lien if you own a home.
You would not be collection proof by simply setting up an LLC.
When you set up the account was it with an EIN # or your social? MY SSN
How is the business structured, C or S corp, LLC, partnership, other? I’M NOT SURE IF I AM INC
Can you provide more information about the current status of your unpaid credit card debts, who you owe, the balances, who is now collecting, have you been sued, is there a judgment currently? NOTHING BAD YET, BUT I HAVE RECEIVED 70K IN MEDICAL BILLS AND I AM A 1099 EMPLOYEE AND MY CHECKING ACCOUNT IS FROM EARNINGS FROM BEING A 1099
What state do you live in?
I would be concerned about any bank account that my social security number was used to open it.
Can a newly funded DBA with it’s own EIN and non similar name be levyed by personal creditors with outstanding judgements in NY state ie credit card repossessed car etc
Judgment creditors are typically looking for a name and social match. It does not sound like that is the case here, but I will still be concerned, if it were me, if my name was on the account.
i had an old business which was a judgement was made to me personally. dated Oct 10th 2010, i just received a notice stating the judgement is to me personally. i have a new company S corporation. the letter from creditors attorney states they are going to garnish my new S corporation business and the S corporation business savings account. can they do that at this time the business accounts are not garnished. I think they have tried but failed?
Talk to an experienced debt collection consumer law attorney in your state about what is at risk, and how long judgments last in your state. Some can be renewed for ever, or you may be in the clear in another 10 years.
Credit card has ein only no SS and semi fictitious name. Busness has few assets.
Not much to worry about on the personal side if that is the case.
I’m an authorized signer on a bank account but my husband is the owner can they garnish that account for a default judgement on a credit card debt?
Your name and SSN being attached to the account puts it at risk. You can go in to the bank together and take you off the account.
Im a silent partners in an LLC (30% owner) My business partner/mechanic ran into some hard times and the bank account is -$2000 (around $1600 of that is from overdraft fees, he had auto payments set up and the companies tried to run them multiple times a week after insufficient funds)
I only helped start the business and funded it with $3,000 dollars, i do not think i want to add any more money to the business especially because i have gotten nothing back yet (we have been open for over a year)
If the LLC buisness bank account is charged off, can i be held liable for anything? (both our names are on the business and the buisness bank account)
Thank you very much for your time
With your name and SSN associated with the bank account you will typically be part of the collection process. Depending on the creditor and situation this can also lead to credit report damage.
Can a LLC. business account be levied for default federal student loans?
An LLC structured correctly would not be levied for a personal debt. Talk to an experienced debt collection defense attorney in your state for clarity.
I have an old account with USAA that was in 2004 and the Bank closed it for an overdraft of $198 in 2004. I wasn’t aware of this because I moved around a lot back then recently I opened another account with USAA made a deposit a small one they immediately cease the deposit and applied it to the old account and told me I could make deposits but could not withdraw any money until the 198th is paid off on the event bank account they had written off as a bad debt. Is this legal?
It likely is, but contact an attorney in your state and ask about this.
One of my business bank accounts was overdrawn and in the negative. The bank closed the account and charged it off to a debt collector. I have another business bank account with the same business name and EIN. Can they end up getting funds form that other account?
Is the other business account with the same bank? If so, what bank are your accounts with?
No, it’s a different bank. I just know that for personal accounts, if there’s a judgment against you, they can find your bank account and take your funds. But they can’t take it from a business account. However, if they say the BUSINESS owes, can they find the other business bank account and take it from there? They would obviously have to sue the company first and win, and then get a ruling/judgement in their favor, and then do it. But can they even do that? Thanks.
There are some instances where a business account can be placed at risk when there is a judgment against the business itself.
What type of business structure is it (S or C corp LLC, DBA)?
I did miss your reply until you brought my attention to it.
Thanks. It’s a single member domestic LLC. Not DBA. And yes, that’s my questions, if it comes to the point where there’s a judgement against it, can they find another bank account and garnish the funds?
It is possible. Canvassing banks is rather simple, and done all the time. Locating the bank is one thing, getting the bank to forward the funds another. I would run your situation by an experienced collections defense attorney in your state. I can email you list of them if you like?
The type of attorney I will email you has a practice that focuses on consumer collections through the courts, but they should be readily able to answer about bank levies that can hit a single member LLC. More often I see this type of situation prompt asset seizure and not operating accounts.
Ok thanks. It’s only $75 so I doubt they will go to too much trouble. Also, there are no assets except some money in that other bank account. Yes you can email me attorneys. Thanks
State?
Did you get my reply? Just curious because you were so fast with the other one, and now it’s been 3 weeks.
I have a summary for jugdement on a llc that i closed down, i current have a new llc and a new tax id, can they garnish the new business for what i owed on the old one?
I typically do not see that happen, but what was the judgment debt about?
I have a judgment against me from a student loan. I am not making payments on it because I cannot afford to make the payments, I’ve tried at tax time to do a lump sum now and then next year but they won’t work with me that way they want it all in one sum. I have the opportunity to have a financial backer to open a business in my name but the financial part is not. Would my llc account be open to having a freeze on the account or would they be able to take the property that’s in the business for payment?
I do not typically see businesses set up as an LLC harmed for the personal debts of a member of the LLC. Talk with an experienced business law attorney about how you set up your entity and make sure you are doing it right. I know many accountants that are knowledgeable in this regard too, so check with that type of resource if you have one already.
I have an S corp in NY and with the current state of the economy we have had the worst year. My business partner had personaly signed for all our credit lines and he has filed for chapter 7. We opened up a new S corporation with a new name. My question is can our new bank account for the new S corp be in jeapordy from debt collectors from the old S corp?
I find that unlikely. You may want to run your scenario by an experienced debt collection defense attorney in New York too.
Our business has been sued and a bank levy has been issued, the business has a number of DBA accounts associated with it. We had filed a “Withdrawal of DBA” and opened a new DBA by the same name under a different EIN. Would this free that specific DBA account from being affected by the bank levy? Does the DBA still carry the same liability or does that end with the date of withdrawal? Thanks for any assistance.
What type of issue was the foundation of the judgment? Was it unpaid business lines of credit?
The name and EIN will certainly be the easiest thing to match for the judgment creditor, but it does not have to end there.
How much is the judgment for?
I live in the state of Arkansas I have a personal judgment against me. I have a business acct filed with an ein tax number. . Is this business acct at risk for levy for my personal debt. Also this business acct holds vendor moneys in escrow for a month at a time. So technically the money in this acct isn’t mine. Can this acct be seized due to the nature of the acct and using an ein rather than social? Will I be given any notice if it were to be levied or any chance to dispute this prior to any possible seizure?
I forgot to mention my business is a llc with sole ownership.
Generally speaking, you will be able to formally contest any “taking” or levy against the account.
I do not see personal collection judgments reach to completely separate business accounts. You will want to connect with an experienced debt defense attorney for their feedback about your situation.
How much is the judgment for? What are your goals for dealing with it?
Hi Michael,
I have a subchapter S corp in Oregon and am dealing with a collections company for a hospital bill I was unable to make payments on, they would take no less than $400 a month and I couldn’t afford that.
I am speaking with the collections company, they already filed a small claims against me, it is $8,900. I just emailed them my last 90 days of personal bank statements, which don’t show much income at all. Can they request to see my business account? And can they go after that? Or my corporation? I don’t make much at all right now, I am an artist and any money at all I do make goes straight to bills. I’m stuck right now, specially after being so sick.
Thank you for your input 🙂
Heather
Your business account is not typically at risk in this scenario, but you should respond to anything that that is required by the court (such as during as asset hearing). Talk over what you must provide and what you can protect with an experienced debt collection defense attorney. I can email you a couple of really good attorneys in the Portland area if you like?
Was any of the bill covered by insurance?
Thank you Michael! I would appreciate that 🙂
Yes, I had to fight with the insurance agency to even cover the surgery. They didn’t want to at first, I got a hospital bill for $13,000. But I was able to prove my gallbladder was gangrenous and it wasn’t just an elective surgery like they tried to file it as. I was only supposed to owe $6,000 (deductible) but the insurance wouldn’t cover the anesthesiologist, they said he was from out of my network. I will never understand insurance 🙂 So as of now the bill is $8,900.
I sent you an email with contact info to the two attorneys. Let me know how that progresses.
Hi Michael,
I have a charged-off debt from B of A. So far nothing has happened other than it appearing on my credit report. If they do get a judgment can that money be taken from my business account also? The business is a sole proprietorship.
I live in Nevada.
Many business owners set up a sole Proprietorship and still have an EIN associated with operations bank accounts etc. Is your bank account for the business associated with your social security number?
What is your goal to deal with the BofA account? You can settle for reasonable amounts with Bank of America at virtually every stage of debt collection.
My husband was in business with a friend a few years back. The friend up and closed the business with out the my husbands knowledge. The friend took some lifts (mechanic shop) out of the building they were in and wasn’t suppose to. Well the friend declared Bankruptcy on everything under his personal name not the business. Yes he put those lifts in there as well. Well my hubby got sued for them for 28,000. and the friend got nothing because of the bankruptcy. The friend still has the lifts in his new shop! The lawyer for the lift company just seized my husband and his business partners company bank account and our personal account. There is a judgement on my husband and its on his credit. So is this legal? We live in Florida
I would encourage you to talk about all of this with an experienced debt collection defense attorney. There may something you can do to unwind what happened in court without your husbands knowledge.
Where in Florida are you? I can send you some contact info to some attorneys I know of with the experience you need.
I have old personal credit card judgments and I now what to open an LLC for my new business in NJ. Can they come after my LLC?
I do not see instances where an LLC is aggressively sought for payment on a credit card judgment against you personally. Who is the judgment creditor? What is the approximate amount of the judgment, and how old is it?
One of them is Midland Funding in 2009 and the other one was in 2011 by Vanz LLC (not sure who they are).
One of them is 3900 and the other is 4700
Vanz LLC is a debt buyer.
I do not see you having trouble with either as it relates to your accounts opened with the EIN for your LLC.
Just know that those judgments aren’t going anywhere soon, are probably growing from interest, and can often be negotiated for reduced payoffs.
I have a judgement placed on me from a past experience. If i partner in with a C corporation becoming a shareholder and owner can the person who has the judgement on me take action on the c corportation?
I generally do not see that happen. What is the judgment from (type of debt), and for how much?
I recently incurred a large negative securities unsecured balance due to a trade. They will not have a judgment for three months. I am a sole proprietor. I am thinking of forming a LLC not to protect my money which I am willing to pay as garnish in NY but to protect my business banking so I can function and pay employees in case they freeze my account. Is it to late to do this since they have no judgment? Should I open the new business account in a different bank than my personal account?
The first thing that jumps to mind is whether or not any moves you make now, could later be construed to have been for the purpose of evading creditors. If you are in the midst of a legal proceeding, attorneys will sometimes advise against property transfers and the like. If it were me, I would run your business restructure plans by an attorney. You will want to be certain that your plans accomplish everything you want them to.
Ive just had a judgment placed against my LLC for $30K. They have frozen my acct. If I file bankruptcy for this LLC and begin another with a similar name ..but different EIN can they go after that one and do I have to notify my clients. Also are all banks notified or just my bank. Can I attempt to open another acct temp and await another lien until I contact a bankruptcy lawyer.
Talk with the attorney about your next steps for banking and/or operating structure.
What type of debt was this? What was the lawsuit about (generally)?
I will be personally bankrupt. I have a personal overdraft and unable to pay. However I have a small business account with the same bank with a couple of hundreds of pounds in it. Are the bank able to claim this??
My experiences and knowledge are limited to North America. A friend, and debt relief industry expert, has a site with a great UK resource available to you that can answer your questions: https://getoutofdebt.org/free-uk-debt-help-and-advice.
If I have a writ of garnishment against me and the writ lists my LLC as the judgment debtor and attempts to list a partial FEIN.
Can this writ attach to my personal or DBA bank accounts? The DBA account is listed under the same case number (with the last four digits of the DBA account number) and is listed in the Writ, but is clearly states it is attached to the LLC and the FEIN.
I would be worried about the DBA account, but less so of the personal account… that is, if I was not a defendant named in the lawsuit.
As with all stuff like this, it is best to speak with an experienced debt collection defense attorney in your state. If you need help locating one, post the name of a larger city nearby. I will send you different contact points for attorneys who tend to offer no cost initial consults.
Can an old personal credit card debt be legally levied from my Business checking its an LLC?
A lawyers office is trying to do the Levy?
Who is the plaintiff for the judgment the attorney is trying to collect on? When did the judgment occur? What bank is the LLC checking account at?
In 2001 my x-wife and I divorced and about 5 credit cards with substantial sums on them went unpaid, about $40,000 in debt. The collection letters and calls finally stopped about 2 years ago. Some of the creditor’s inquiries stopped long before that. I’m going to create a 2 person LLC for a new business soon. My question is: Will the creditors be able to find my new EIN for the LLC, connecting it to my SSN?
They may be able to locate the new business account, if they tried real hard. The 2 person nature of the LLC bank accounts may prevent them from being able to do anything even if they knew about the accounts. Talk this over with an experienced collection defense attorney to get a more detailed answer.
Were you even sued for the debts? If so, who were the plaintiffs in the suits?
My father personally guaranteed a credit card for a C corp in Florida. The card was opened in the company name, (his name on top) with the company FEIN. It was an invitation he received in the mail that he signed, returned and they sent him the card. When the economy tanked he couldn’t pay due to the lack of business and a back injury. He closed the company. THe credit card co. has brought a suit against him, a summary judgement is scheduled for 10/1. My question is now that he is retired, can they garnish his social security check and that of his wife, and also he receives a ckeck from VA. Also can they lien thier checking account where their checks are direct deposited and where they have their savings. They have a debit/credit card attached to the account. Their home is homesteaded and their vehicles are owned jointly.
I cover all of the Florida exemptions from judgment creditors over on this post: https://consumerrecoverynetwork.com/question/social-security-pension-state-exemption-debt-collector-garnishment/. If he is liable personally, which I would think he is given the circumstances you shared, he will have some concerns, but can navigate all of that.
Who is the creditor or debt buyer suing? Has he given any thought to fighting the suit?
Thank you for the prompt reply. The credit card is from Capital One and the buyer/collector is Erskine & Fleisher, Sunrise, Florida.
I don’t think my dad has ever thought of going to court, and right now he is waiting for a date from the VA for back surgery. There was a previous hearing that the attorney was supposed to conference my dad in. They never did and although his wife called to let the judge know and left a message, the next thing they received was a Final Disposition Form Pursuant to F.S. 25.075 which is a “no show”. I called the judge and explained and they rescheduled the hearing for 10/1.
I don’t think that at this time my dad would be able to undergo any further stress. He is also a heart patient and a diabetic, and needs to be in a good emotional state of mind. Thank you so much. You have given us some peace of mind in that if a judgement is brought against him, they cannot go against his social security or VA benefit.
Monica
Be sure to read that other article I linked to, and the comment section about laws protecting him in his state. This stuff does not go away, but you can navigate through it.
About 4 months ago, I formed an LLC in Arizona. I then opened a commercial bank account under the LLC’s name and its EIN. However, I am the sole signatory and the only member and manager of the LLC.
A credit card company is now suing me for an old personal debt. Is my LLC’s income or cash reserves at risk of being frozen/levied/taken after the court awards a judgment?
After initially funding the LLC with my own money, I have kept the income and balances separate between me and the business. I have one checking account (in my personal name) for my personal spending money; a separate account for the business. I draw a fixed salary from the LLC’s account once a month, starting 3 months ago. I’ve also been compliant with other legal paperwork filing requirements (such as publishing a notice of my LLC’s organization, as required by state law).
I’m a home-based business, so the LLC’s address is the same as my own. Don’t know if that makes a difference, but I thought I’d mention it. It’s a single member, manager-managed LLC in Arizona with its own EIN and separate bank account.
Is it at risk for my personal debt? Even if “legally” they can’t take its money, what do I do if they try to levy it anyway?
Thanks so much for your help and advice! I really appreciate it.
Additional note: The LLC’s name is completely unique from my own name.
It sounds like your social security number is not tied to the LLC’s bank account. And the account is not in your name. All of which would generally mean less risk to the account that result from personal issues.
I would run your scenario by an experienced debt defense attorney with a practice in Arizona. They will likely be immediately familiar with what exposure you have. And that confidence is worth paying for the consult, if you would even need to.
I for one would feel better if my personal account was not at the same bank as the account for LLC (even if I had nothing to worry about – as “stuff” happens).
Thanks for the quick response.
I’ve decided to speak with a bankruptcy lawyer to see if that’s the best option for my current financial situation. I’ll ask him about the LLC’s risk exposure as well. Forgive my ignorance, but when you say “debt defense attorney,” would that include a bankruptcy attorney — or is that something different? Should I consult with someone in addition to the bankruptcy lawyer on this issue?
Fortunately, as per your suggestion to have my person and business accounts at separate banks, I’m glad to say I do.
I was talking about a more specialized type of consumer law attorney, but the BK attorney you speak with should be able to readily answer your questions about bank account risks by judgment creditors.
A debt defense attorney will typically be more familiar with beating back collections in the courts. If you would like to see about locating one in your area, try https://www.consumeradvocates.org/find-an-attorney.
Hello Mike,
Albeit 6 years later, I’m curious to hear what transpired from your situation. I might be in a similar situation in the future so it’d be helpful to see how your case transpired (even though you’re in AZ).
Also, did you speak/handle your situation with a debt defense attorney as Michael suggested?
Thanks and hope everything turned-out favorably.
I am self employed and considered a contractor by Sears. I got ill and had to have two operatios.My health insurance paid 80persent of the bill. I could not work so I couldn’t make my portion of the bill. The hospital hired a cretior to collect. I tried to negotiate a small monthly payment, $200 a month. They wouldn’t take it so they went to court and got a levy on my business account which I still have time to fight. The letter from the court says garnishment all over. I live in oregon. I’ve read alot of articles that a creditor cannot garnish me becuase I am a contractor. My bank has both my s.s. card number and my EIM number. I talked to one lawyer and he said there was nothing I could do because they were levying my business acct. He did say to change banks and when I made payments to send money orders. So I am at a lost that oregon law says they can’t and yet they already filed in court. I have 10 day to come up with a plan. Any advise? In disbelief in oregon.
Consumer protection laws are designed to shield you from collections related to consumer debt. Business debts do not enjoy many of those same consumer protections.
I can email you contact info to two of the consumer attorneys I would call If I were you. You may hear the same thing, but I would be more confident in what was said if I were to hear it from one of them. Would you like the contact info?
Also,how much money are we talking about here?
$2500,
Yes send me the contact info.
Thanks
Reynaldo [edit: removed last name for commenter privacy]
I sent you an email with the contact info to the attorneys that can help.
I had a garnish check from one of my clients my janitorial business because I had a judgement against me because I forgot to pay my workers comp insurance, stupid I know. They are still paying the lady after 5 years and when the court appeals it i get notification in the mail which stress me out. I have a new business and a new ein number. Can workers comp garnish checks from my two small accounts even if my ein number has changed. Just trying to get back on my feet and I need this money to keep coming in. Do I have to worry.
Thanks for your help
Eric – A better resource to answer your question would be a local attorney with debt collection experience. Post the name of a nearby city and I can email you some contact details for attorneys with the experience you need.
Regarding personal judgements going after corporate banks accounts; I understand they cant. But I read they can seize your shares of the corporation, thereby seizing the business and all its assets. Is this correct Michael and if yes, how likely are they to do this? Is it a complicated procedure?