US BANK collections seized all my unemployment from bank account!?

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I am a financially struggling college student, as is my husband. We have been unemployed for several months due to this economy and fell horribly behind on all our credit cards, mortgage, second mortgage..etc. I know now to save for a rainy day, and not to get credit for something I can wait for a few months to save for it. After several yard sales, and visits to the pawn shop to sell our belongings to try and stay current on our bills, it became inevitable that we could no longer make it anymore. Last month we moved from our home(which is in foreclosure) into a small apartment, and now ride our bikes to and from school. We were able to get some student loans and we are receiving unemployment insurance for a little while..not a lot of money but it gets us by each month. Anyway, today I checked my bank account and a creditor that I owe for my second mortgage(usbank) seized all the money I had in my account w/o my authorization. It was about $ 2000 and out of that money $ 1300 was my unemployment and $ 700 was part of a student loan. We tried to get them to give it back, cause it is going to be all the money we have for the next couple months, but they said that since we are in default that they have every right to empty our account! Any suggestions on how to get that money back? I am really desperate!! I still have schoolbooks/supplies that I have to purchase, plus food, some gas, and shelter/electric/gas/trash/etc. Please help! OH and please don’t lecture me about being unwise with money…I am now an avid Dave Ramsey fan and hope to get past this horrible hiccup in my life and set myself up(with my husband) so that we learn from our mistakes and be better prepared for future events!
My checking account is through Usbank, & according to my mortgage contract they can seize ‘property or collateral’ in the event of default on the loan. But–isn’t there stipulations on what types of funds that creditors/debt collectors can seize? I thought government received money such as unemployment, student loans, & Veterans Benefits were exempt from seizure? I now have a new bank account through a separate bank, but I will only use it it cash my checks now. I am too scared to put the last of my money somewhere it can be stolen.
=( Oh, and no judgments or lawsuits have been filed against us yet, but according to the Usbank collections, they sent us the notice that they were authorized to collect on the debt(which we ‘somehow’ didn’t get), and then later in the conversation they said that ‘someone’ had called in & had authorized the transaction. I think Usbank is smelling super fishy at this point! Thank you for all your advice so far..I will be speaking to a lawyer tomorrow!!!!

4 Comments
  1. Reply
    Bostonian In MO
    February 22, 2011 at 9:15 am

    Was the bank account with the same bank as the loan was? If so, they have a right of offset for any funds on deposit with the institution, as is spelled out in your contract. This is standard practice and there is probably nothing that you can do about it.

    If this was a different bank, the only way that they could seize the funds would be following a judgment. In other words, they would have to sue you and win. If you were served with a summons and ignored it, they would have won a default judgment against you and could have used that to seize the funds.

    If you were sued but were never served with the paperwork properly you might have a chance of recovering. Consult with an attorney as this is not DIY territory.

  2. Reply
    CatDad
    February 22, 2011 at 10:01 am

    Please clarify:
    Did you have your regular checking account with this same institution that you defaulted on your 2nd mortgage with (USBank)? If so, then this would be the most logical explanation for why they took money from your account.
    Did USBank take you to court and win a judgment?
    Did you give your checking account/bank transit numbers to USBank debt collectors?

  3. Reply
    MSAD
    February 22, 2011 at 10:12 am

    First thing I’d do is close that bank account and open another at a different bank. Then make sure you never give them electronic access to the new account.

    I’d send a letter to them certified mail demanding that they provide written proof that they had the authority to do that.

    I’d also go down to the bank and speak with the bank manager about it. Can you dispute this with the bank?

    If your bank account is not with USbank – maybe your local bank manager or loan officer can give you a quick, free lesson on what mortgage companies can and can’t do. After all, the bank makes mortgage loans too. At any rate – you may get someone who can give you a little bit of information on the process. This may help you decide what your next step is.

    You can also call clerk of court or go to your court house records room and find out if any legal proceedings were filed against you. Foreclosure is a legal process and paperwork has to be filed. If they had the right to garnish you that would require paperwork through the courts.

    Finance companies are regulated by the Federal Trade Commission. Put in a call to them and see they can provide you any information or guidance. If they can’t, they may be able to tell you where to go.

    You may want to consider filing a complaint against your mortgage lender with the FTC as well.

    I also found a web site for a consumer advocacy group. It looks like it can refer to you to an attorney who may be able to assist. Perhaps these folks can give you some information. http://www.naca.net/

    Here’s another web page with some info: http://www.mortgagenewsdaily.com/wiki/Lender_Recourse.asp

    Pull your loan documents – there should be something in there saying what the lender can do. Do your loan docs give them the right to raid your bank account?

    I know money is tight…but if all else fails, it may be worth it to take all your mortgage documents to an attorney and have a consultation.

    And….since you are now on beans and rice….rice and beans… you can always put in a call to Dave Ramsey’s show and see if you can speak with him about this.

    Good Luck.

  4. Reply
    bryan l
    February 22, 2011 at 10:57 am

    wow i feel real bad for you? You already have bad luck with your job loss, home loss and now this. If USbank was the one that holds you checking account with therefore they can see you are receiving unemployment and they did this to you know. If so just reading this story I am going to end my 16 years of banking with them. It would be different if you had a huge inheritance that you deposited in your account and you were blowing all of your money. If US bank is not your holder of that checking account you may get that money back. You need to get a judgment in order to do what they just did to you, if they did not even get a judgment and pulled that money out of your account due to having you account on file if you used auto pay extremely illegal BTW.
    anyways i would go into your community center or contact your local red cross chapter to get some legal advice. something is not right here!

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