Bank Trumps Garnishment To Set-off Debtor Deposit Account
A debtor was current on its loan to a bank but had lost a collection lawsuit brought by a vendor. Armed with the judgment, the vendor sought to garnish the bank account held at my client, the creditor bank. After being served with the garnishment the bank called me to find out what to do.
In some ways, a garnishment is like an involuntary check written by the holder of a deposit account. Under the doctrine of setoff, a bank may refuse to pay demands against that account if the account holder has a loan with the bank that is in default. At that point, the bank is entitled to setoff the monies held in the accounts against the loan balance in default.
For my client the bank, entry of the judgment in favor of the vendor was an event of default under the bank loan. As a result, my advice was that the bank was authorized to refuse payment of a check demand (in this case, the garnishment) and setoff the account funds against the bank loan. The garnishing creditor had no greater rights in the deposit account than did the debtor.
Awarded: Bank awarded setoff right against garnishing judgment holder
A Track Record of Success in Maryland, Virginia, Pennsylvania, & Delaware Commercial Litigation & Bankruptcy Cases
DISCLAIMER: Please note that every case is different and these verdicts and settlements, while accurate, do not represent what we may obtain for you in your case.
A Track Record of Success in Maryland, Virginia, Pennsylvania, & Delaware Commercial Litigation & Bankruptcy Cases
DISCLAIMER: Please note that every case is different and these verdicts and settlements, while accurate, do not represent what we may obtain for you in your case.
