How To Open A Bank Account That No Creditor Can Touch

If you’re worried that a creditor might be coming after your bank account, don’t panic. While you should take it seriously, there are several things you can do to safeguard your money.

The important thing is that you understand your options and act quickly.

If you’re in this situation and looking for what you can do, or want to protect yourself in case it happens in the future, continue reading.

Do Creditors Have Access To Your Money?

Creditors, legally known as judgment creditors, who have payments in arrears can sue debtors for money owed. Different types of creditors can legally access your money in different ways, depending on several factors, like who the creditor is and how much you owe.

Either way, a creditor can reclaim any money owed using the below methods:

  • Bank levy
  • Wage garnishment
  • Tax refunds reclamation

Knowing the difference between creditor and debtor is crucial here, as you’re likely to see both terms.

  • Creditor – person or entity that is trying to get access to your funds
  • Debtor – person or entity that owes the money (i.e. you)

How Can A Creditor Garnish Your Bank Account?

A debt collector can’t simply walk into your bank or employer’s office and demand that they give you your money. There is an entire procedure in place that a creditor must follow.

Knowing this procedure is important. Becoming familiar with what happens is especially important since there are multiple ways to limit the damage.

Keep in mind that rules may change from one state to the next, so it’s best to check the regulations that apply to where you live. We’ve listed the available resources further down this article.

Step 1: Debt collector sends a Debt Validation Letter

Before a debtor can even sue you, they need to send you a Debt Validation Letter. You’ll find the whole process in the Fair Debt Collection Practices Act, also known as FDCPA. This letter will contain an outline of the debt that you owe the creditor.

Once you receive the letter, you have 30 days to dispute the debt, request that the debt break validated, or pay. If the creditor proves that you owe them money and you don’t pay the money, they can move to step 2 – sue you in court.

Step 2: Debt collector sues the debtor

If the creditor decides to go ahead and sue you, you will receive a letter with information about the lawsuit against you. The letter will also contain details of when you need to appear in court, including the date, time, and place.

At this point, you might want to consult with a lawyer.


There are some exceptions to rule 2, such as when the creditor is the US government. The latter can be the case if you owe federal debt such as taxes to the IRS or payments on student loans.

Other creditors, such as might be the case with a bank, might include a clause in their fine print that gives them the right to withdraw any due funds directly from your bank account if, for example, you fall behind on credit card debt payments.

Step 3: Debtor “means test”

Some states will impose a means test. This test measures how much income a person has as well as the size of their assets. This test will assess if the debtor has enough money to make payments.

The actual test can vary from one state to the next and includes care of dependents as one of the criteria.

It is also important to note here that certain funds and income are exempt. We list exempt funds and income further down below.

Step 4: Court passes judgment

Once all evidence is presented, and the means test results are ready, the court will pass judgment.

The court judgment may go in your favor or not. If it goes against you, the court will issue a garnishment or account seizure order.

Step 5: Debt collector goes to the bank, employer

The debt collector can then initiate proceedings to freeze your bank account or garnish your wages.

The creditor will need to present a valid writ of garnishment. When it comes to wage garnishment, limits and restrictions vary by state. In most cases, the amount of money a creditor can garnish is limited to 25% of your paycheck after tax.


There are exceptions to this. If the amount owed is for child support payments, alimony, taxes, or student loan payments, the percentage can be higher.

Step 6: Account is frozen, and the garnishment is placed

An account can have frozen funds for up to a year, but this varies from state to state. While the bank account is frozen, the money stays in your account, but you cannot access it.

At this time, you may want to consider stopping any further direct deposits from going into your frozen bank accounts. You can also use this time to challenge the court order.

You can even speak to the creditor to come to an arrangement, but be cautious – you might want to talk to a lawyer first before approaching someone who just sued you.

Can A Creditor Go After All Your Money?

Certain incomes and funds are exempt from being levied or garnished. In most cases, you will need to follow specific procedures that may vary from one state to another to prove the exemptions.

These procedures may include filing a form with the court, proving that the funds fall within these categories. You can use these exemptions to protect your real estate and other funds.

Even so, you might encounter difficulties proving this, such as when different funds end up lumped together.

We will go through some examples of what can happen and what you can do about it but first, let’s go through the different kinds of exemptions that a court might recognize.

Type Exemptions
Payments and Income
  • Social Security Income
  • Supplement Security Income
  • Federal benefits
  • Civil service benefits
  • Railroad retirement benefits
  • Veterans’ benefits
  • Student loan disbursements
  • Student loan aid
  • FEMA aid
Other Funds
  • Basic living expenses
  • Offshore bank accounts
Other Exemptions
  • Head of Household Exemption
  • Bankruptcy

How To Protect These Funds From Creditors

As we mentioned earlier, protecting exempt funds might not always be a straightforward affair, especially if exempt and non-exempt funds are blended. To help you get around this problem, here are some steps that you can take.

Some steps are proactive, which means you can take them before the issue arises. Of course, every situation is different due to specifics that change from one person and case to another. You’ll need to apply a bit of strategy to see which steps will work out best in your particular situation.

1. Use direct deposit

If you receive exempt funds via direct deposit, it will be easier to verify what money is exempt. Direct deposits also make it easier to receive money, with some banks depositing funds two whole days earlier.

2. Use a separate account

Using a separate account can help you to keep funds separate in the first place. Having a different account can be especially useful if funds are received via direct deposit, as described in point number one. There isn’t a limit to how many bank accounts you can have.

3. Don’t deposit checks

If you receive payments via check, cash the check but don’t deposit the money into your bank account. While using cash might not be the best solution, if your bank account gets frozen, the cash you have at home will stay yours.

What you can do to protect your bank account from creditors

Having a creditor freeze your bank account or place a garnishment on your paycheck is by no means a pleasant experience and can be very stressful for many people. Luckily, you can take some steps to limit the damage and make sure that you stay afloat.

The most important thing here is to act fast to secure your money while ensuring you come up with a repayment plan. Keep in mind that creditors are more interested in getting paid than see you endure financial hardship.

Even so, it’s crucial to make sure that you improve your financial situation. From better budgeting to supplementing your income, there are many things you can do to make sure that you emerge out of this stronger and better equipped to tackle whatever challenges come your way.

Where To Find Help

There are several organizations, businesses, and resources that offer help. Referring to these can help you understand the most complex of procedures.

While this article covers the basics, it’s worth noting that some things tend to change from one state to another.

  • Consumer Financial Protection Bureau- The bureau offers several resources, including sample letters, legal rights, and how-to guides on their website.
  • Credit Counselors- Get help with debt repayments, including advice on budgeting tools to manage your personal finances better.
  • State department of labor- Use your state department of labor’s website to learn more about the wage garnishment rules that apply in your state.
  • Your attorney- It might be worth seeking legal advice to explore other avenues that might be available to you. Do keep in mind that attorney-client privilege applies, so you can be as open as required to get over this hurdle.
  • DIY with Nolo- If you’d prefer to do it yourself, then check out Nolo, a publishing company specializing in legal content with DIY tools for taking matters into your own hands.

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