Address Judgments Before They Become Levies
The best way to prevent a levy is to deal with the judgment. Options: negotiate a payment plan with the creditor (this usually prevents levy action), settle the judgment for a lump sum (creditors often accept 50-70%), or file bankruptcy to eliminate the judgment debt entirely. Do not ignore judgments -- they only get worse with interest and additional collection costs.
Account Management Strategies
Keep exempt funds (Social Security, VA, disability) in a separate dedicated account. Minimize the balance in any account that might be levied. Use automatic payments to reduce the sitting balance. Consider a credit union instead of a large bank -- credit unions are less frequently targeted by levy-servicing processes. Open accounts at an institution where the creditor does not already know your banking relationship.
Know Your State's Exemptions
Research your state's bank account exemption laws before you need them. Some states protect very specific dollar amounts. Others protect all funds from specific sources. Knowing your exemptions in advance lets you structure your finances to maximize protection. Review your state's exemptions.
When to File Bankruptcy Proactively
If you have outstanding judgments and the levy is just a matter of time, filing bankruptcy proactively is often better than waiting. Bankruptcy eliminates the underlying debt, removes the judgment, and prevents all future collection activity. Filing before the levy preserves your funds. Filing after the levy may still release frozen funds but is more stressful and complex.
Frequently Asked Questions
Can I move money out of my account to prevent a levy?
Moving money after you know a judgment exists may be considered a fraudulent transfer. Moving money into an exempt form (like contributing to a retirement account) before any legal action begins is generally permissible. Consult an attorney before making large transfers.
Should I keep cash instead of using a bank account?
This is impractical for most people and may cause other problems (inability to pay bills electronically, risk of theft). Better to use proper exemptions and account management strategies.
How do I find out if there are judgments against me?
Check your county courthouse records (many are online), your credit reports (judgments may appear), and state court databases. Some creditors obtain judgments by default because the debtor was not properly served -- if you discover a judgment you did not know about, consult an attorney about vacating it.
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