The collection of debt is a stressful event. Phone calls, nasty letters and constant threats of legal action are often enough to drive you crazy. Creditors have a trick up their sleeve that most people don't know about, and when it happens it's even more disastrous then an irritating bill collector phone call.
The person in debt to the bank often calls it stealing money. The creditor calls it a right of offset. And it's perfectly legal. A right of offset can be described as: a banks legal right to seize funds that a debtor may have on deposit to cover a loan in default.
In Canada, it happens quite often, and people in debt to their bank are frequently left wondering how they are going to account for this money and get it back. Having money offset from your bank account when your rent or mortgage payment is due can be extremely stressful.
Creditors can take money out of your bank account and in some cases without asking your permission if you are sufficiently delinquent in your payments on a credit card or loan to them. Most of the big banks in Canada have the concept of a right of offset written into their credit card and loan agreements. It's a level of protection you usually give them when you sign for and borrow unsecured money from your bank in the form of a credit card or loan.
Most people are oblivious to this fact and when a regular paycheque goes into your account, it can disappear as quickly as it arrived. Remember your bank can view your cycle of deposits and withdrawals, so they know when to go in and get their money back.
Can you get the money back? Sometimes, the bank will work with you and return it if you can talk to the right person. Your branch manager or the banks Ombudsman can help. But they usually don't have to. There are also in some cases certain restrictions on the types of deposits that can be offset from your account. You should also be aware that if you owe bank "A" a balance on a credit card, they cannot offset money out of an account from bank "B". The account has to be with the same financial institution.
The best protection is not exposing yourself to having money offset from your bank account by staying up to date in loan and credit card payments. But for some people this is not a reality. I know first hand that bad things do happen to good people and that most folks who end up in debt did not intend for it to happen.
There are further steps you can take to protect yourself, not depositing new money into an account you owe credit card or loan debts is a start. But this is not a solution to debt. Seek help from a reputable debt settlement company if you are drowning in debt, and not able to deal with it. But do something today!
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years.http://www.totaldebtfreedom.ca
Thursday, April 17, 2008
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