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Prepaid Debit Card and Debt Collections

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Mark Cappel
UpdatedJun 13, 2024
Key Takeaways:
  • Review your rights under the Fair Debt Collections Practices Act.
  • Understand that a creditors ability to garnish your wages varies from state to state.
  • Always respond to a summons you receive.

Can a creditor seize or garnish my prepaid debit card?

Can a prepaid Mastercard debit card from Netspend (Meta Bank)be seized or garnished by creditors ?

The answer to your question hinges on the answers to two questions: 1) Does the creditor know this account exists in your name? 2) Does NetSpend have your Social Security number linked to your name on your account?

If the creditor is unaware of the existence of the account in question, then it will not garnish or levy the account. Customarily, a debtor will be required by court order to disclose the name of his or her financial institutions and account numbers.

It is possible for IRS to discover accounts associated with a Social Security number, but that searching ability is unavailable to private creditors, to my knowledge. Therefore, if you were required to provide your Social Security number when you opened your netSpend account it is theoretically possible for some creditors to locate that account.

It is important for you to understand your state laws are regarding consumer protection. Below, I discuss how the collection process works and the traditional methods which a creditor utilizes to collect a debt. I also provide you with the resource page that explains what the consumer protection laws are for each state.

When a debtor stops paying on a debt, a creditor will attempt to contact the debtor on the telephone and via the mail. When the number of days since the most recent payment reaches 120-180 days, the account is no longer considered current and the creditor is required by generally accepted accounting principles to "write-off" the debt. Writing-off a debt does not mean the debtor is no longer responsible for the debt, or that collection efforts cease.

The write-off date has almost nothing to do with the statute of limitations for debts. To learn more about the distinction between these issues, read Charge Off, Credit Report, Statute of Limitations & Merged Creditors.

At the write-off point, the creditor will transfer the debt to a late-accounts department, or has the option to sell the debt to a collection agent. The collection agent will buy the debt at a discount. However, the collection agent has the right to collect the entire balance due plus interest.

A collection agent may use aggressive tactics to when contacting the debtor. The collection agent may threaten to call the debtor's employer, file charges with the local sheriff, or say they will park a truck in front of the debtor's house with a sign that reads "Bad Debt" on it. All of these tactics and many others are illegal under the Fair Debt Collection Practices Act (FDCPA). Start here to learn the rights consumers have in collections under the FDCPA.

A creditor -- a debt collector that owns a debt account is a creditor -- has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. A court (or in some states, a law firm for the plaintiff) is required to notify the debtor of the time and place of the hearing.

This notice is called a "summons to appear" or a "summons and complaint." In some jurisdictions, a process server will present the summons personally. In others the sheriff's deputy will pay a visit with the summons, and in others the notice will appear in the mail. Each jurisdiction has different civil procedure rules regarding proper service of notice. (See Served Summons and Complaint to learn more about this process.)

If you ever receive a summons you should do as it instructs! This is not just a social invitation that you can ignore. In the hearing, the judge will decide if the creditor should be allowed to collect the debt. If the debtor fails to appear, the judge has no choice but to decide on behalf of the creditor.

Therefore, if you receive a summons, the first thing you should do is contact the law firm representing the creditor. Open a negotiation to see if they are willing to settle the debt. If not, it would be wise to respond as indicated in the summons. If there is a hearing, attend it and present your side of the story to the judge. Use facts, tell the truth, dress appropriately, and show the court respect. The court may or may not decide in your favor, but at least you exercised your right to be heard.

The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court 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. Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.

Wage Garnishment

The most common method used by judgment creditors to enforce judgments is wage garnishment, in which a judgment creditor would contact the debtor's employer and require the employer to deduct a certain portion of the debtor's wages each pay period and send the money to the creditor. However, several states, including Texas, Pennsylvania, North Carolina, and South Carolina, do not allow wage garnishment for the enforcement of most judgments. In several other states, such as New Hampshire, wage garnishment is not the "preferred" method of judgment enforcement because, while possible, it is a tedious and time consuming process for creditors. In most states, creditors are allowed to garnish between 10% and 25% of your wages, with the percentage allowed being determined by each state. See Wage Garnishment to learn more about wage garnishment.

Levy Bank Accounts

A levy means that the creditor has the right to take whatever money in a debtor's account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state's laws to find if a bank account can be levied. See the resource State Consumer Protection Laws and Exemptions for an overview of each state's rules.


A lien is an encumbrance -- a claim -- on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinance the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment. Again, every state has its own rules about property liens, so debtors with a judgment against them who own property should review their state's laws to learn creditor can and cannot do to enforce its judgment. See the resource State Consumer Protection Laws and Exemptions for an overview of each state's rules. See the Liens & How to Resolve Them article to learn more.

Debt Resolution

If you have a judgment against you, consult with an attorney licensed in your jurisdiction to learn how the judgment will affect you, based on your individual financial circumstances and your local rules.

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 a settlement offer. Even with a judgment in place, the law firm must spend money to try to collect the debt. Getting a wage garnishment, levy, or lien takes time, and time to a law firm is money. The law firm may settle for a lump-sum payment. See "Debt Negotiation and Settlement Advice" before opening negotiations with a creditor. See "What Are My Debt Consolidation Options?" to learn more about your rights and options for resolving the debt.

Important! Get all settlement offers in writing before sending a check to the law firm or collection agent.

I hope this information helps you Find. Learn & Save.



Struggling with debt?

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

Collection and delinquency rates vary by state. For example, in Tennessee, 15% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 5%.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.



KKS, Jun, 2023
Can I visa prepaid card that you can reload be garnished or frozen in anyway by a credit card company, lawyer wear a judgment has been issued against you
BBetsalel Cohen, Jul, 2023
I am not a lawyer, but I can provide some general information. If a judgment has been issued against you and a creditor or their lawyer is attempting to collect the debt, they may explore various legal means to enforce the judgment, which can potentially include garnishing or freezing certain financial assets, including prepaid cards. Some states, for example, Texas, don't allow for wage garnishment but do allow bank account garnishment. However, it might be possible for the credit card company that issued the card to locate the card and file a garnishment. That would depend on the type of card and the local rules. f you are concerned about the potential garnishment or freezing of funds on a prepaid card, you should consult with an attorney who can guide you on the best course of action based on your circumstances. They can provide you with accurate advice and help you understand the rights and options available to you.
RRaymond, Aug, 2020

Can they take out money if I owe?

DDaniel Cohen, Sep, 2020

Raymond, if you are required to make payment on this card, fail to do so, and have a balance on the card, I would assume the card issuer can take what you owe and charge a late fee. The rules should be spelled out in the agreement you signed or at the card issuer's official website.

CCondra, Mar, 2014
I owe the NC Dept. of Revenue $9000. The State of NC is interested in hiring me and requires direct deposit. If I had my check directly deposited to a prepaid debit card could the NC Dept. of Revenue and IRS freeze my account or put a lien or levy on my funds?
BBill, Mar, 2014
State and federal tax authorities have strong powers to levy bank accounts and garnish wages. They don't need to get a judgment against you, but only send a "Notice of Intent to Levy." I recommend that you set up a monthly payment plan. Once you are in a formal payment plan, as long as you make the payments as agreed, all levies are placed on hold.

Wages loaded on debit cards are not exempt from wage garnishment.
DDaniel, Jun, 2014
What if you owe taxes to the NC Dept of Revenue, but are unemployed. Can they find and garnish your prepaid card and if so how likely are they to find your prepaid card ?
BBill, Jun, 2014
I called the North Carolina Department of Revenue. I was told that they do not garnish state unemployment benefits, including benefits disbursed through the North Carolina EPPICard prepaid card. The collections department said if there were a garnishment in a case like this, they would reverse it if you alerted them.

If you have a different kind of prepaid card, it could be subject to garnishment, though it is not likely that they will locate it.

An unemployed person with a tax debt, state or federal, is well-served to contact the state tax authority or IRS and set up Not Collectible Status. That is a temporary arrangement where the authority agrees not to pursue collections. It often lasts one year. That means even if you start working, you have some time to get on your feet before working out a payment plan. Another reason for you to try to get Not Collectible status is that it will protect your bank account, which could otherwise be levied.

I feel compelled to mention that when I called the NC Dept. Of Revenue, at 714-519-3000, not only did someone pick up right away, but he was very courteous and helpful, answering all my questions.