Advice on Bank Levies by Judgment Creditor

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READER QUESTION

I have a judgment against me for which my bank account is levied every month. How can I change this arrangement?

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Bills.com Resident Expert
Jan 12, 2012
BILL'S ANSWER

I understand how frustrating it must be to endure these repeated bank levies, especially when you have offered to make voluntary payments to this creditor. Unfortunately, since this creditor has obtained a judgment against you, it has the legal right to levy your bank accounts to enforce its judgment.

Depending on your financial situation, it may also be able to garnish your wages and place liens on any property you own, including your home. Since the creditor is repeatedly taking money out of your bank account, the simplest solution to this problem may be to change banks; changing your bank should prevent the creditor from taking any more money out of your current account since that account will no longer be open. Your creditor will not have your new bank account information, as you will have never made payments from the new account, so changing your account may offer you relief from the repeated levies you have been experiencing. Unfortunately, this solution may only be temporary, as the judgment creditor may find your new account by communicating with banks in your area or by demanding the information from you through a court order. These steps will take time though, so changing your bank may at least provide you with some temporary relief while you pursue a more definitive solution to your financial troubles.

To learn more about California’s laws related to the execution of judgments, I encourage you to visit the Bills.com resources Collection Laws and Statutes of Limitation and California Collection Laws.

Bankruptcy

Because this creditor expressed resistance to your efforts to resolve this debt voluntarily, you may want to consider filing for bankruptcy protection, as bankruptcy may be the only definitive way to prevent any further collection activity by this creditor. There are two basic types of consumer bankruptcy: Chapter 7 and Chapter 13.

In a Chapter 7 bankruptcy, also called a liquidation bankruptcy, a bankruptcy trustee will examine your assets, and if you have any assets which are not exempt, sell those non-exempt assets to repay your creditors. Once your non-exempt assets have been sold to pay your creditors, all remaining unsecured debts will be discharged by the bankruptcy court. Many people who file for Chapter 7 protection are able to keep all of their property because they have no non-exempt property. Each state has its own schedule of exempt assets, so you should consult with a qualified bankruptcy attorney in your state to find out if Chapter 7 is a workable solution for your situation. An attorney will also be able to tell you if you qualify to file Chapter 7 under the new guidelines enacted by Congress in 2005.

A Chapter 13 bankruptcy, also called a “wage-earner’s bankruptcy,” allows you to propose a plan to repay creditors over time — usually five years. Your monthly payment amount will be based on your monthly disposable income as defined by the bankruptcy code. After you have made payments to your creditors for five years, any remaining unsecured debts will be discharged. Chapter 13 is commonly used by debtors whose assets exceed the exemptions offered by state law. It is also used by many consumer debtors who do not qualify for Chapter 7 relief under the means test, which went into effect in 2005 with the Bankruptcy Reform Act.

If you are considering filing bankruptcy, you should consult with an attorney to find out if bankruptcy will benefit your financial situation. I encourage you to read more about bankruptcy at the Bills.com bankruptcy information page.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (35)


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Jerry S.
Northville, MI  |  January 04, 2012
Our son receives social security disability. Is he able to open a bank or credit union account that cannot be levied due to judgments by creditors.
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Bills.com
January 04, 2012
See the Bills.com resource May a Creditor Garnish Social Security Benefits? to read a discussion of the issue you raise in your question.
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Barb C.
Aurora, CO  |  November 11, 2011
I live in Colorado. Can I sieze bank account funds in order to satisfy a judgment I have against an individual?
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Bills.com
November 11, 2011
Yes. Consult with a Colorado lawyer to learn how.
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Jeanne C.
Milford Twp., PA  |  September 16, 2011
I have been unemployed for 20 months. My unemployment checks have run out so I am not receiving any income. I co-own a house with my grown son. I had a little money from my 401K in an annuity which I had to take out to continue to live on so we don't lose the house. I have a joint checking account with my son which we use to deposit and pay the mortgage payment every month. I began looking for help to pay my bills since the unemployment rendered my income to less than 50% of what I was making previously. I found the only help available to me that I could work with was a Debt Settlement Company. I recently received a summons for a court appearance from one of my creditors (GE Money Bank). The attorney for the Debt Settlement Company told me they might freeze my bank account since in PA they can't garnish wages. Will they be able to freeze my joint account with my son? I have read that income from unemployment and pension accounts can't be frozen. Would the money from my 401K annuity be exempt? The only money I have left in my bank account is from the annuity. I thought to put my money in another bank and have it linked to my joint account with my son. Will this make the money safe? My Debt Settlement Company is going to seek a settlement with GE Money Bank as soon as possible since I have some money in there to work with right now but that might now go through before I go to court. I'm worried about what to do or say in court. I would appreciate any feedback on this problem. Thanks.
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Bills.com
September 16, 2011
Joint accounts create more trouble than they are worth. Close all joint accounts, and open separate accounts at the same bank or credit union. Use that institution's transfer mechanism to move funds between the two accounts.

Generally speaking, Social Security, unemployment, and pension benefits cannot be garnished. However, in many states, once the funds arrive in a financial account they are ripe for account levy, subject to the consumer's state laws.
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Lisa S.
Sun City, CA  |  August 01, 2011
My husband and I reside in California. I have a Judgment against me for attorney's fees for a patent lawsuit which I lost by default because I could not afford an attorney. They have levied my (separate) bank accounts although there was less than $20 in them and I am not employed. How long does an individual levy last? How frequently can they levy? Daily, weekly, monthly, etc.? I am concerned that they will go after my husband's accounts or garnish his wages or that they will try to seize our cars or personal belongings, because we are in a joint property state. Is there any way to protect his accounts and wages? Can they seize a car if it has a loan on it? They will not set up a payment plan and won't and never have discussed it with me. Can I somehow force them to work out a payment plan? Is bankruptcy my only option? Thanks for your help.
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Bills.com
August 02, 2011
When a bank account is levied, the general process is for the bank to freeze the funds in the account, up to the amount of the levy, then remit the funds. A judgment-creditor can keep on levying accounts, as far as I know, as often as it wants to, potentially aiming to hit your account at a time when a paycheck is likely to just have arrived.

The judgment-creditor doesn't need to work at a payment plan with you, even if it makes sense to do so. You should consult with a bankruptcy attorney. You can see if that is the best solution for the judgment debt and also best ascertain the chances that California being a community property state puts your husband's income and assets at risk.

A car that is worth less than what you owe on it, can't be seized by a judgment-creditor. Its claim is in second position to the lien-holder that financed the car.
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Elizabeth M.
Fort Wayne, IN  |  May 02, 2011
I have a joint bank account with my fiance`. He doesnt work and i do. He owes child support to Oklahoma and we live in Indiana. They put a levy on my bank account, and are threating to put a levy on my home and car. Is there anything i can do to prevent us from loosing everything we have. He pays his obiligated amount for child support to Oklahoma. Since they put that levy on my bank account im negative 16,247.87 in my checking account.
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Bills.com
May 02, 2011
Joint accounts create more problems than they solve, as your anecdote illustrates painfully. For the benefit of other readers, I suggest people who need to share funds open separate accounts at the same bank or credit union. Use that institution's online banking function to transfer money between accounts electronically when necessary.

Consult with an Indiana lawyer who has experience in consumer law to learn your rights and liabilities regarding your vehicle and home. If the vehicle is titled in both your name and your spouse's name, it is at risk for a lien. If the home is jointly titled, it also is at risk. Again, consult with a lawyer to learn your rights and what steps you can take to insulate your property.
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Lisa S.
Atlanta, GA  |  January 05, 2011
Are bank levies legal in all states?
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Bills.com
January 06, 2011
Bank levies are legal in all states. Not every state allows any creditor with a judgment to levy bank accounts. For instance, in Delaware, a credit card company or debt collector cannot levy a bank account. The IRS,a state tax authority, or a collector for back child support, alimony or delinquent federal student loans could levy a bank account in any state.
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Cheryl C.
Jefferson Borough, PA  |  January 07, 2011
what about Pa levies???? ssi,veterans ,dpw income only
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Bills.com
January 07, 2011
A creditor with a judgment against you can a bank levy in the State of PA. The creditor does not know where the funds in your account came from. The creditor is only concerned with whether or not you have funds in your account that can be used to pay them. Some forms of income are exempt from bank levies, such as welfare payments, worker's compensation, unemployment benefits, Social Security, child support and VA benefits. If your only sources of income can't be levied from a bank account, speak to your bank and have a notation made that all the funds in your account come from exempt sources. Do not co-mingle any other funds in this account or you could put even the funds from the exempt sources at risk. That means that if your grandmother gives you $500 for your birthday, you should cash it and hold the money yourself or open a separate account for your non-exempt funds. The non-exempt funds account could certainly be lost to you in a bank levy.
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Steve K.
San Jose, CA  |  January 15, 2011
Bill I moved to Singapore 1 year ago. I had quiet a few credit card debts and chose to ignore them. Now I have received a levy notice at my sister's address. I am concerned and need some advice. Can the creditor levy anything against my sister's addresse? I have very little money in my bank account( so I am not worried ) but can they go after my 401k or foreign bank accounts? It did say that I had to file an exemption against all my assets(only have 401 k) to be exempt(but I did not). Can you give me some advice?
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Bills.com
January 17, 2011
The US does not have any notion of feudal debt bondage that ensnares an entire family. If your family possesses real or personal property titled in their names, and not yours, they have no legal liability for your debts. In all jurisdictions I am aware of, 401(k) and other retirement accounts are exempt from judgment. As you mentioned, however, you need to tell the court which of your accounts are exempt. It is always a good idea to respond to a court's request for information. Put another way, it is a bad idea to ignore a judge. I am assuming the deadline passed for filing the exemption. Consult with an attorney in the US state where you resided formerly to ask how to proceed if the deadline passed. If the deadline has not passed, then file for the exemption.
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Lee R.
Atlanta, GA  |  December 18, 2010
I owned a hair salon, got behind on payments, and finally closed and received a default judgment. My bank account was levied and all funds were taken out. I still owe on the judgment. I received a interrogatories document and I talked to attorney for creditor before the bank levy. He told me to fill out the document listing assets, bank accounts, ectc. He told me we could work out a payment plan once this was filed. The next day I got the bank levy. After I submit documents, is it true that the creditor can only take 25% of my income/pay checks. Since I'm self employed and opened another salon, should I put the new salon in someone else's name? If I keep it in my name, can the creditor liquidate all my equipment?
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Bills.com
December 20, 2010
It is unfortunate the creditor's attorney lied to you and promised to "work out a payment plan" and then used the information you provided to levy your bank account. Perhaps from that attorney's perspective, the payment plan was emptying your account

Despite this unsavory behavior by this attorney, you need to find a different attorney to help you protect the assets in your new venture. Consult with an attorney who has experience forming corporations. He or she will help you form a corporation that insulates you and the new venture from each other's liabilities.
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Charlie .
October 28, 2010
My Lawyer made a agreement with a creditor lawyers and made such payment to them to settle even have it in writing. 2 weeks later the creditors lawyers imposed a levy on my checking account and took every penny, so know my lawyer tells me they broke the law and we need to sue them to get my 2g's back do thing sound hopeful cause i'm broke
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Bills.com
October 28, 2010
I would listen to your lawyer as he/she has already negotiated a settlement for your debts and knows the specific debt and contract laws in your state.
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Eric S.
Nashville, TN  |  January 12, 2012
I just had a levy served on my account, which caused my joint account to be completely exhausted. In Tennessee, what recourse is there for that innocent party. With a Chp. 13, does one get to keep their home and automobile?
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Bills.com
January 12, 2012
The facts in your question illustrate why I recommend against joint accounts. I realize that observation is not helpful to you now, but your sharing your experience here may help another reader avoid your predicament.

I cannot find a Tennessee law that prevents a judgment creditor from levying a joint account. I hasten to add that my search was not exhaustive, and I am not trained in Tennessee law. Therefore, your wisest course of action is to consult with a Tennessee lawyer who has experience in consumer law.

Ask your lawyer to review Tennessee Title 26 Execution /Chapter 2 Exemptions - Garnishment /Part 1 Exemptions, also known as the Personal Property Owner's Rights and Garnishment Act of 1978, and ask if the $4,000 account exemption applies to you in your situation. If so, you may be entitled to a refund of the amount levied from your account.

Regarding bankruptcy, see the Bills.com resource chapter 13 bankruptcy to learn more about this form of bankruptcy.
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