It's easier to prevent bank account freezes than to stop them once they happen. If your bank account is garnished or levied to pay your debts, stop the procedure by paying off the debt or by challenging the debt or the levy in court.
Bank Account Garnishment or Levy
If you owe a debt and you don't pay it when it is due, your wages may be garnished. If that happens, a certain amount of the total debt is withheld from your wages periodically and used to pay off the debt. When a creditor seizes a bank account rather than wages, it is usually termed a levy. When a creditor levies on a financial account, he freezes the account and takes the money in that account to pay your debt.
But garnishment and levies don't happen automatically for every debt. Only debts like unpaid state and federal taxes, student loans and child support arrears result in garnishment and levies without a court procedure. That's because very specific laws allow the government and the courts to use these enforcement techniques without a court action.
If you owe a debt to a private creditor, like Uncle Joe or the store where you bought your couch, the creditor must go to court to establish the debt and get a judgment before it can enforce that judgment with a levy or a garnishment. You will get notice of this legal action and have a chance to appear and contest the debt.
Read More: Can a Joint Checking Account Be Garnished?
Stopping a Bank Account Garnishment or Levy
Once your bank account is levied, it isn't that easy to stop. The creditors who usually levy accounts are government agencies like the IRS or Department of Education. They do not have to go to court to get an order, and you have few options to stop them. If there is some mistake of fact about the debts – identity confusion or theft, for example – call the governmental agency and explain it to them. If they are unreasonable, you can file a case in court to stop the levy.
Prevent Bank Account Garnishment or Levy
Like many unpleasant consequences in life, bank account levies are easier to prevent than to halt once in progress. Obviously, keeping up with your debts is one way of avoiding garnishment. With family support payments, you must go to court to seek a modification of your support obligation before you stop paying to avoid wage garnishment and bank account levies. Even if you lose your job, your support obligation continues until the court reduces or eliminates it.
With unpaid taxes, you can usually work out a payment plan with the taxing authority that avoids wage garnishment or financial account seizure. Doing nothing and hoping the debit goes away is always a bad plan.
- Creditors are often more willing to work with you than are collection agencies. If possible, work out an agreement with the creditor before your account goes to collections, becomes a summary judgment and gets your bank account garnished.
- Bank garnishments can happen quickly. Act as soon as you're notified of a possible garnishment.
- Beginning bankruptcy proceedings will not protect you from a bank garnishment. Protection against debt collection does not occur until the day you file.
Teo Spengler earned a J.D. from U.C. Berkeley's Boalt Hall. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an M.A. and an M.F.A in creative writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.