Take these steps so that a creditor can't levy your bank account freeze the funds. While your bank account funds are frozen: you won't have access to the money, and checks that you wrote before your funds were frozen, won't clear. Don't Ignore Debt Collectors If you want to avoid having a creditor levy your bank accounts , you need to pay your debts. Have Government Assistance Funds Direct Deposited If an attachment order or garnishment is received by a bank, it must review the account to determine if direct deposits into the accounts include certain government assistance income, such as Social Security and veteran's benefits.
Other benefits covered by this rule include: Supplemental Security Income federal railroad retirement, unemployment and sickness Civil Service Retirement System, and Federal Employee Retirement System.
The bottom line: Switch all government assistance payments to direct deposit. Don't Transfer Your Social Security Funds to Different Accounts Social Security income gets special protections, especially if you have the money direct deposited into your account, but even if you do not. Know Your State's Exemptions and Use Non-Exempt Funds First Each state's laws provide for certain property or income which can't be taken by creditors to satisfy unpaid debts.
Keep Separate Accounts for Exempt Funds, Don't Commingle Them with Non-Exempt Funds If you keep a separate account for funds that you know qualify for a specific exemption from attachment, if an attachment occurs, it might be easier and quicker to have the account released to you if you can show that the account only contains funds that qualify for an exemption. Don't Keep Your Account in a Bank That You Owe Money To If you owe money to the bank that holds your savings or checking accounts and you fall behind on your payments, the bank has the right to set off the funds in your account against the debt.
Talk to a Lawyer Consider talking with a debt relief lawyer in your state to learn about laws that might help protect your money and assets from creditors. Talk to a Bankruptcy Lawyer Need professional help? Start here. Practice Area Please select Zip Code.
In a state-law case, such as a divorce, banks must follow state law on levies for such items as child support and alimony. For this purpose, New Jersey law allows levies on "cash or cash-equivalent assets," specifically naming trusts as one possible source. Holding a bachelor's degree from Yale, Streissguth has published more than works of history, biography, current affairs and geography for young readers. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.
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While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. A bank levy is a powerful tool that a creditor, with court approval, can use to remove funds from your bank account. The creditor may levy funds up to the amount you owe, which can leave you with nothing to pay your rent and other bills. A bank account levy allows a creditor to legally take funds from your bank account. When a bank gets notification of this legal action, it will freeze your account and send the appropriate funds to your creditor.
In turn, your creditor uses the funds to pay down the debt you owe. A bank levy is usually the result of a months-long process, so understanding the timeline can help you potentially avoid the levy. It starts once you fall behind on payments. Depending on the contract you signed, your lender may consider your account delinquent after one or more missed payments.
The lender will likely report those missed payments to the credit bureaus , which can damage your credit history. Eventually, the creditor may try to recoup its money by filing a lawsuit and proving to the courts that you owe the debt. The creditor has to notify you at this point, which should signal that a levy could be in your future. If the creditor successfully gets a court judgment against you, it has stronger tools to collect that debt. One of these tools is a bank account levy.
Once the creditor receives the go-ahead for a bank account levy, it must provide the judgment to your bank. The bank will freeze your account and send the appropriate funds to the creditor. Offices that handle this type of problem often try to make it easy to find this information. So start by checking the website of any of the following: your state court, your county or small claims courthouse, the local law library or bar association, or the sheriff's office.
For instance, here are a few state resources:. Take a look at the language and procedures used—it's all relatively similar across the states. That said, it is imperative to find the steps you'll be required to take. Use the documents to familiarize yourself with terms you can use in a Google search. For instance, you'll likely want to include the following: your state or county name, levy and garnishment states use the words interchangeably , objection, exemption, form, and bank account.
You're looking for the forms you'll need to file, plus instructions. Most courts will want an exemption, an objection, or an order to show cause form, along with a financial statement and supporting documents. Be sure to serve the paperwork on the creditor. Your state will have rules on the service procedures, as well. Also, most state exemption laws protect property from creditor collections and bankruptcy.
Start by learning about property exemptions in bankruptcy. No one wants the feeling of dread that accompanies worrying about an account being emptied. If you have a judgment against you and can't afford to pay, filing for bankruptcy could be an excellent way to go—especially if the debt is a type you can erase. For instance, Chapter 7 works well for personal loans, medical bills, and most credit card balances. If you qualify, you'll be able to wipe out the debt in about four months.
Better yet, you won't need to make any monthly payments. Keep in mind, however, that you can't eliminate all debts in bankruptcy.
For instance, priority debts aren't dischargeable. Examples of priority debts include domestic support obligations and some income tax arrearages.
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