Bank Levy Laws

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If your company is unable to pay its debts on time, creditors may place a levy on its bank accounts. The Internal Revenue Service and state agencies may also file a levy for the company's unpaid taxes, fines or other penalties. Once the levy has been placed on an account, no employees of the company may access the money. Any outstanding checks will bounce, and the company will be liable for any resulting fees. If the debt is not paid off within the waiting period, the creditor will take the amount owed directly from the company's account.

Time Frame

The bank must send you notification that a levy will be placed on your account. There is a 21-day waiting period before any money may be removed. This gives you an opportunity to contact the creditor and work out a payment plan. The levy stays in place until the debt is paid in full. If you do not have enough money in your account to cover the entire amount of the debt, the creditor can choose to keep the bank levy active until you deposit additional money. If you close your account and move to another bank, the creditor may be able to trace you and place a levy on the new account.


The levy is limited to the amount of the debt plus any applicable interest and penalties. In some states, creditors are allowed to take all of the money in the account if needed to pay the debt. Other states let you keep a small amount in the account to use. For example, Ohio only allows creditors to levy amounts over $400. If you have a joint account with a person other than your spouse, private creditors may only levy your portion of the account. The IRS may levy all joint accounts, even if you share the money with a non-spouse.

Court Orders

The IRS and other government agencies do not need a court order to issue a bank levy. Private creditors must obtain a favorable judgment against you in a lawsuit. To execute the levy, the creditor must also request a writ of execution from the same court. The sheriff's department will then serve the writ instructing your bank to freeze the money in your account.


Some types of income are exempt from levies, even if you have deposited the money into your bank account. This includes child support, workers' compensation payments and government income such as Social Security, welfare, disability insurance, unemployment and veterans' benefits. You must wait until the levy has been filed before you may request an exemption. Your request must be accompanied by documentation showing the source of the income.


About the Author

Denise Sullivan has been writing professionally for more than five years after a long career in business. She has been published on Yahoo! Voices and other publications. Her areas of expertise are business, law, gaming, home renovations, gardening, sports and exercise.

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