What is the Right of Setoff and How Can a Bank Use It?
If you are behind on payments with a bank creditor, it is important to learn about the right of “setoff” and how a bank might be able to use it in order to recoup some of the money you owe. There are many different types of loans that a debtor might have through a bank, and the rates and agreements will vary. Banks commonly provide auto loans, mortgages, home equity loans, personal loans, student loans, lines of credit, and credit cards. If you also have one or more bank accounts with the same institution that has provided you with a credit card or a type of loan and you are behind on your payments, the right of setoff means that the bank could potentially take money from your account to pay what you owe on your debts.
Our Georgia debt settlement lawyers can provide you with more information about the right of setoff and how banks use it, and we can begin working with you today if you want to find out more about debt settlement options to avoid the bank taking money from one of your accounts.
Understanding the Right of Setoff
The right of setoff, also sometimes described as a “right to setoff” or a “setoff right” or a “bank setoff,” is defined by Georgia law broadly as a process that allows a party to recoup a debt they are owed by “setting off” that debt with money from an existing account owned by the debtor.
In more basic terms, a right of setoff means that a financial institution (usually a bank) can take money from a debtor’s account in order to make up some or all of the debt that the account holder owes to the financial institution. The types of accounts from which the financial institution may be able to take funds can include, for example, checking accounts, savings accounts, and even money market accounts.
How Banks Use the Right of Setoff
Agreements that debtors enter into with banks often include a right of setoff, although Georgia law allows for a right of setoff. Generally speaking, for a bank to take money from an account you have to cover the debt you owe on a different obligation to the bank (such as a personal loan or a credit card payment), the bank will need to have evidence that you owe the debt and that it could be eligible to file a lawsuit against you in order to recoup the money it is instead taking from your account.
How your specific bank can use the right of setoff will depend on the details of any agreements you signed with the bank, such as granting the right of setoff in the event you missed a credit card payment. There are limits on what the bank can take, and you should know that a bank cannot take exempt funds, such as Social Security payments or disability benefits. Banks can generally only take money from your account to cover missed credit card payments if you have previously granted that right.
Contact a Georgia Debt Settlement Lawyer
Whether a bank or another financial institution has taken advantage of the right of setoff and recouped money for a missed payment from one of your accounts, or you are concerned about any other aspects of debt collection and want to find out more about debt settlement, you should discuss the details of your situation with a lawyer who can help. One of the experienced Georgia debt settlement attorneys at Konn Law Firm LLC can speak with you today to learn more about your circumstances and to provide you with information about options for debt settlement and other methods for managing the debt you are facing.
Sources:
law.justia.com/codes/georgia/2020/title-13/chapter-7/section-13-7-1/
law.justia.com/codes/georgia/title-7/chapter-1/article-8/section-7-1-821/
wolterskluwer.com/en/expert-insights/common-types-of-bank-loans
