Can my business account be garnished for personal judgements?

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Can my business account be garnished for personal judgements?

I am a veteran who came off active duty a year ago and have been on unemployment since then. A credit card company recently got a default against me and has garnished the funds in a new business account that I started several months ago. The funds are payments for orders to be delivered in the future and they belong to my customers. I need help getting the funds back.

Asked on April 13, 2012 under Bankruptcy Law, Minnesota

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

What kind of a busines is it?

If it is a corporation ("inc.") or a limited liability company ("LLC"), then the business is a separate and distinct legal entity from you--it's a different "person." As such, the corporation's or LLC's bank account cannot be garnished for your personal debt any more than you personal account(s) could be garnished for a business debt which you had not guaranteed. If this is the case, you may be able to get the money back, and you should consult with an attorney about doing so.

If the business is sole proprietorship--that is, you did not set up a corporation or LLC--then there is no separate legal entity: the business's accounts are your personal accounts. The law does not occur about the purpose of an account--for example, whether it's for personal use or for your business--only who owns it. So if there is no separate legal entity owing this account, creditors could garnish it the way they could garnish any other bank account of yours.


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