Can a bank account that is overdrawn be sent to collections?

If you don’t pay attention to your old checking accounts, they can become problematic. They can leave you in debt, whether they’re overdrawn before you move on to another account or get overdrawn because you don’t monitor them often.

If you’re not careful, old bank accounts can have a negative impact on your credit and the total cost of your debt over time. Understanding how accounts become overdrawn can help you avoid taking these steps. Learn more about the process and whether you can be sued by a bank for an overdrawn account by reading on.

This article includes the following sections:

  • Do Collection Agencies Take Overdrawn Bank Accounts?
  • Checking Accounts That Have Been Overdrawn
  • How to Avoid a Checking Account Overdraft
  • Overdrawn Accounts: Collection Procedures and Consequences
  • What Is the Time Limit for Collecting Debt from an Overdrawn Bank Account?
  • Final Thoughts

Do Collection Agencies Take Overdrawn Bank Accounts?

Bank accounts can be sent to collections, and this happens frequently. If you overdraw your checking, savings, or money market account and don’t deposit the funds to cover the overdraft in a timely manner, the bank may send the account to collection or a debt collector.

Checking Accounts That Have Been Overdrawn

Fees for Overdrafts

When the amount of the items offered for payment exceeds the available money in your checking account, you’ll be charged an overdraft fee. Fees for overdrafts normally vary from $25 to $35. If your bank covers the overdraft, you’ll have to pay back the total amount overdrawn plus the cost to get your account back in order.

Funds That Aren’t Enough (NSF)

If an item is offered for payment and funds are not available, banks charge a non-sufficient funds fee. Despite the fact that this sum is smaller than an overdraft fee, these “return fees” continue to accumulate. A non-sufficient funds fee is charged for each new item presented for payment while your checking account is in the negative.

Other Charges

You may not have enough money in your account to pay your bank’s monthly or extra fees if you aren’t aware of them. However, the bank will still deduct the fees, potentially putting your account in the red. Here are some of the most prevalent charges to be aware of:

How to Avoid a Checking Account Overdraft

Regularly checking your account and keeping a watch on the transactions, deposits, and fees that are coming through can help you avoid overdrawing your balances. Other ways to keep your checking account from going into overdraft include:

Overdrawn Accounts: Collection Procedures and Consequences

Understanding what occurs when your bank account is turned over to collections will help you figure out how to fix it and prevent it from happening again. It’s crucial not to believe that your bank will just cancel the loan.

When Your Bank Account Is Sent to Collections, What Happens Next?

An overdrawn checking account is frequently forwarded to a bank’s collections department when it is closed. To assist in the recovery of these funds, the bank may hire a debt collection firm.

Is it possible to open a new checking account if you owe money to your current bank?

Collections departments will frequently enter your checking account into ChexSystems, a database that keeps track of past-due bank accounts. Before allowing consumers to open new accounts, several banks check this service. It can be difficult to open new accounts if you have overdrawn accounts, delinquent balances, or a history of failed checks.

Is it True That Having an Overdraft Hurts Your Credit?

If you take care of the problem quickly away after overdrawing your account, it won’t affect your credit. Overdraft balances that are sent to collections, on the other hand, can appear as negative items on credit reports. This can lower your credit score and make obtaining credit more difficult or expensive.

Is it possible for a bank to sue you for an overdrawn account?

The bank may take legal action against you if you are unaware of an overdrawn account or ignore it. The amount your account is overdrawn is a legal debt you owe, which means the bank can sue you and seek payment through legal procedures such as wage garnishment.

What Is the Best Way to Get a Bank Account Out of Collections?

In general, to get an account out of collections, you must pay the amount of the obligation. You may be able to simply put monies into the account to offset the amount you owe the bank if the account is in the bank’s collections department. If the account is overdrawn by $90, for example, you might deposit $100.

However, an old account can pose some difficulties. If you haven’t paid off a negative balance on an old account, the bank may have closed it and sent the debt to collectors. The procedure is called as a charge-off, and it is normally started when your account has been past due for a certain amount of time.

What Is the Time Limit for Collecting Debt from an Overdrawn Bank Account?

Once your overdrawn bank account is placed in collections, a bank or debt collection agency has a certain period of time to suit you. The statute of limitations refers to the time limit for taking legal action.

Bank debts are classified as unsecured obligations, and the time limit for filing a lawsuit varies by state. Your debt becomes time-barred after this period, which means you still owe the money but can no longer be sued.

If a bank or collection agency attempts to sue you after the statute of limitations has expired, you should get legal assistance. The statute of limitations is usually three to ten years long.

Final Thoughts

If not addressed as quickly as feasible, overdrawn checking accounts might result in long-term concerns. These accounts are reported to credit bureaus, and they can have a long-term impact on your credit. Your debt may potentially be sold to third parties, who may take drastic measures to collect payment. If at all feasible, try to settle your account before it goes to collections

Are you unsure if you have an old bank account? Sign up for ExtraCredit to keep track of your reports and scores so you can spot when a collections account is causing problems. ExtraCredit members also receive savings on services, such as credit repair from one of the industry’s leading credit repair companies, to assist you.

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