What Is a Bank Account Levy?
A bank account levy is a legal process where a creditor with a court judgment instructs your bank to freeze funds in your account and turn them over to the creditor. Your bank must comply -- they have no choice.
How It Happens
Creditor sues you and wins a judgment. Creditor obtains a writ of execution or garnishment order. The order is served on your bank. Your bank freezes the amount owed (or your entire balance if less). You have a limited time to claim exemptions before the money is released to the creditor.
Protected Funds
Federal benefits (Social Security, SSI, VA, federal retirement) deposited in the last 2 months are automatically protected. Your bank must review deposits and protect up to 2 months of federal benefit deposits without you having to do anything. Other exempt funds (state exemptions, child support, workers comp) may require you to file a claim of exemption.
How to Respond
Act immediately -- you may have only 10-15 days to claim exemptions. File a claim of exemption with the court identifying protected funds. If all funds are from exempt sources, request the bank release the freeze. Contact the creditor to negotiate. Consider filing bankruptcy for immediate protection. The automatic stay stops levies.
Prevention
Keep exempt funds (Social Security, disability) in a separate account that receives only exempt deposits. This makes it easier to prove the funds are protected. Consider bankruptcy before a levy happens if you have outstanding judgments. Are you judgment proof?
Frequently Asked Questions
Can a creditor take my Social Security?
Generally no. Federal law protects the last 2 months of Social Security deposits from levy. However, you may need to file a claim of exemption for amounts beyond 2 months.
How fast does bankruptcy stop a levy?
Immediately upon filing. The automatic stay requires the bank to release frozen funds (except for certain tax debts and domestic support).
Can a creditor levy my account without warning?
Usually yes. Once they have a judgment, they can serve the levy on your bank without notifying you first. You find out when your account is frozen.
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