Can banks take money from your acct for an old charged off bad debt student loan without permission/notice?

Question

I was a co-signer for my son when he was in college (4 yrs ago). When the loan was due, he could not pay it. They called (collection people) him daily. They offered to accept half and he said great, buthe would have to send payments. They said they could not take payments. Finally the loan was CHARGED OFF (at least that's what my credit report said. Now to present day. My husband was laid off and he cashed in his IRAs in order to try to start a small business and to survive. Out of the blue, we get hit with a $4500 withdrawal that Chase helped themselves to in order to pay off that debt. While it was a loan, I did not know they could simply help themselves to my account. Is this legal?

Answer 1

Yes and no.

YES they can take ANY funds in your name in their possession to pay any debts you owe them without notice.

No, this is NOT taking money without permission. The terms you agreed to, but probably never read, when you opened the account SPECIFICALLY granted permission.



Note: Charged of is an ACCOUNTING term that means the account in no longer listed as a collectable asset on their balance sheet. If has ABSOLUTELY no legal significance.



Also Note: This may have been a loan used to pay for school, but it was NOT a student loan. If it had been a student loan, the US Government would have paid Chase and the IRS would have become the collection agency.



Edit: In response to MVD34: There is no need to read the loan agreement. The terms of EVERY loan, checking account, savings account, brokerage account, and every other account with ANY financial institution in the last several decades have included the 'right of offset' that Chase exercised in this case. If MS Word can in a 'Attorney's Edition", a new blank document would be at least 2 pages long, and this clause would be included.

Answer 2

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RE Can banks take money from your acct for an old charged off bad debt student loan without permission/notice?



I was a co-signer for my son when he was in college (4 yrs ago). When the loan was due, he could not pay it. They called (collection people) him daily. They offered to accept half and he said great, buthe would have to send payments. They said they could not take payments. Finally the loan was CHARGED OFF (at least that's what my credit report said. Now to present day. My husband was laid off and he cashed in his IRAs in order to try to start a small business and to survive. Out of the blue, we get hit with a $4500 withdrawal that Chase helped themselves to in order to pay off that debt. While it was a loan, I did not know they could simply help themselves to my account. Is this legal?

Answer 3

Yes, most likely.



You need to read the terms of the loan you co-signed.



The piece that you seem to be missing is what it meant, legally, when you co-signed. It meant that if he defaulted, you became fully liable for anything he did not pay. The collection process was about what he owed, not what you owe. Unless he has an official statement from the collection agency or loan company that says the loan was "discharged as paid in full," you owe the balance that he did not pay.



The paperwork you signed also (probably) says that they can come after you and your assets at anytime and seize them in payment for this debt.



Read the fine print. If that language is there, then what they did is perfectly legal.



(It's typical of student loans and co-signature documents)

Answer 4

The other answers have covered your specific question. I just want to add this is why you should keep your checking and other deposit accounts at a bank where you don't have loans.



You should be asking your son to cover the $4500 in any way he can - selling personal items, working 2 jobs, whatever it takes. You probably already got screwed by having his defaulted loan on your credit report, he should do everything in his ability to repay you the $4500 immediately.

Answer 5

First, charge off is an accounting term meaning the creditor wrote the debt off their books. It does not mean you no longer owe the debt.



Second, most student loans don't go away. You co-signed for the loan and since your son didn't pay, you have to.

Answer 6

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RE :Can banks take money from your acct for an old charged off bad debt student loan without permission/notice?

I was a co-signer for my son when he was in college (4 yrs ago). When the loan was due, he could not pay it. They called (collection people) him daily. They offered to accept half and he said great, buthe would have to send payments. They said they could not take payments. Finally the loan was CHARGED OFF (at least that's what my credit report said. Now to present day. My husband was laid off and he cashed in his IRAs in order to try to start a small business and to survive. Out of the blue, we get hit with a $4500 withdrawal that Chase helped themselves to in order to pay off that debt. While it was a loan, I did not know they could simply help themselves to my account. Is this legal?

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