How to Open a Bank Account That No Creditor Can Touch

What a Levy Means for You

Creditors can continue to attempt to take money from your account when it comes to a bank levy. Levies take precedence over other bills. This means if you are attempting to pay other bills and a levy is collected, your account might overdraft.

When an overdraft occurs, a poor financial situation may go from bad to worse. Insufficient funds in your account will almost always lead to more fees from both your creditors and fees from your bank. This will leave you with less than you had before if anything at all. And it will be even more difficult to catch up!

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Bank Account Garnishment in Florida

In Florida, bank account garnishment is authorized by Chapter 77 of the Florida Statutes. Specifically, under section 77.03, a judgment creditor can request that a court issue a writ of garnishment. Once issued, the creditor serves the bank with the garnishment. Under section 77.06 of Florida law, the bank must freeze all accounts belonging to the debtor, whether the accounts are individual or joint.

It is not up to the bank to determine whether the judgment debtor has any applicable exemptions to garnishment. Instead, Florida bank account garnishment procedures burden the judgment debtor to claim any applicable exemptions.

Florida debtors can protect their bank accounts from garnishment by taking advantage of the state’s exemptions and garnishment procedures. Florida law exempts from creditor collection money from specific sources such as social security, retirement withdrawals, and annuity distributions. Florida courts have consistently held that money from an exempt asset retains its exemption after the exempt money is deposited in the debtor’s bank accounts.

There are also procedural defenses to garnishment. Florida garnishment statutes impose upon creditors many procedural requirements and time deadlines. The garnishment rules are strictly enforced. A garnishment that deviates in any way from the statute’s garnishment rules should be dissolved and the funds released.

The garnishment statutes set out procedures for garnished debtors to assert a claim of exemption or other legal defenses to the garnishment. The debtor is required to challenge the garnishment in a court proceeding and obtain a court order to release garnished money. All the debtor’s garnished funds remain frozen during the time the debtor is challenging the garnishment in court.

A bank may not be held liable for retaining money in a garnished account during the time the debtor is pursuing a defense through court proceedings. However, there is an exception for social security proceeds: a garnished bank is required to release immediately from garnishment all money traceable to the debtor’s social security payments.

Important: A judgment creditor can still try to garnish a bank account even if it only contains exempt funds.

Get Professional Help if Youre Faced With a Bank Levy 

When faced with a levy on your account, seek advice from a local attorney who is familiar with both state and federal law. Laws applicable to bank levies vary from state to state, and the rules can change over time. Fighting a levy can be a complicated process, and it might be necessary to take your case to court. 

Finding an attorney can be difficult, but having the right attorney in your corner can make a big difference. As indicated, filing for bankruptcy puts a hold on collection efforts and gives you some time to work with a court in prioritizing or discharging your debts. If you decide to pursue bankruptcy, Upsolve can help you find the right attorney  

Talk to a Bankruptcy Lawyer

If you’re not sure how to work through your debt problems, make an appointment with a local bankruptcy attorney. Most can tell you whether it makes more sense to file for bankruptcy or to pursue some other option. And in many cases, the first consultation is free.

PENNSYLVANIA LAWS FOR FREEZING BANK ACCOUNTS

Before a Pennsylvania bank levy can happen, Pennsy

Before a Pennsylvania bank levy can happen, Pennsylvania law requires a series of procedural steps that a creditor, with the assistance of a collection attorney, must follow.  First, the creditor must obtain a money judgment.  After the judgment is obtained, the creditor must find a bank account that is in the name of the debtor.  Once an account is located, the attorney must file and serve a Writ of Execution on the bank.  The Writ of Execution is a legal document that adds the bank as a “garnishee” to the lawsuit.  Adding the bank as a garnishee directs the bank to immediately place a freeze on the account.  When the bank puts a freeze on the account, the debtor is not able to access the funds.  The bank freeze remains in place until the creditor takes the necessary steps to force the bank to turn over the funds to the creditor.

ADVANTAGES AND DISADVANTAGES OF A BANK LEVY

Bank account levies are often a successful way to

Bank account levies are often a successful way to satisfy a Pennsylvania money judgment.  For debt collection attorneys, the procedural requirements are simple and Pennsylvania law favors the creditor.  Bank levies are an efficient process because they do not take a lot of time and the creditor will receive a bank check as opposed to the seizure of other property such as a car or other personal property.  

However, there are some pitfalls to this process.  In order to successfully levy an account, a bank account must be discovered.  This information is generally not available to the public.  It is not advisable to simply “blanket” various banks within a geographic area and randomly send paperwork to every bank in the hope that one of them holds an account.  Experienced Pennsylvania collection attorneys use various methods to discover assets of the debtor, including bank accounts.  This is just one of the reasons why a good collection attorney is invaluable.  

How does filing for bankruptcy help?

As you can see, a judgment gives creditors lots of power over you.

Filing for Chapter 7 bankruptcy or  Chapter 13 bankruptcy stops creditors from getting judgments, and voids any judgments that creditors already have.

If someone is pursuing a judgment against you, then you should talk with an attorney. An experienced Minnesota bankruptcy attorney will offer a free consultation to explain how they can help you.

Bankruptcy is often cheaper than other types of law because bankruptcy lawyers can specialize to bring down costs.

This article is written for informational purposes, does not create an attorney-client relationship, and is not legal advice. If you have a judgment against you, then you should speak with an experienced Minnesota bankruptcy lawyer about the best way to move forward.

Ways to Stop a Levy

Bank levies can continue until your debt is completely satisfied, and they can be used repeatedly. If you don’t have sufficient funds available on the first try, creditors can come back numerous times.

However, you can potentially prevent and limit levies to your account. Speak with a local attorney (laws vary from state to state) to find out what options are available to you. Possible approaches include:

  • Creditor error: If you don’t owe them the money, you can fight the levy and prevent the creditor from moving forward. This approach could work if you already paid the debt, or if the amount is incorrect.
  • Identity theft: If you’re a victim of identity theft, you can show that someone other than you received the funds.
  • Old debt: If the statute of limitations has passed, your creditor might not have the authority to collect from your account, but it may depend on where you live, the law of the state named in the credit agreement, the type of debt, and other factors.
  • No notification: If your creditor did not notify you of any legal actions—you were not properly and legally served—it may be possible to stop any future legal action against you.
  • Bankruptcy: Filing bankruptcy might stop the process, at least temporarily.
  • Negotiation: Any agreement you reach with your creditors can stop the process. It may be worth trying to negotiate so you can take some control over the situation. For example, the Internal Revenue Service (IRS) may release you from a levy if it determines the process is causing "immediate economic hardship."

The source of funds also matters. Depending on how you got the money in your account, it might not be available to creditors. Your bank is supposed to figure out if your account balance contains protected funds. However, things can get complicated if you have deposits from several different sources. Special treatment applies to:

  • Federal payments: Benefits like Social Security payments or federal employee pensions are typically protected. However, if you owe money to the federal government, you don’t enjoy as much protection as you would if you owed a private creditor.
  • Child support: Money you’ve received from child support payments may also be exempt from collection. However, if you’re behind on child support, it may be easier for an ex to tap your bank account.

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Understanding a Bank Levy

Bank levies came into prominence following the 2008 global financial crisis when many of the world’s financial institutions were bailed out by their national governments to avoid an even more disastrous outcome than what had already occurred. Subsequently, many economic leaders and pundits called for a tax on banks to prevent excessive employee bonuses, especially considering that many of the financial institutions would have ceased to exist had it not been for publicly funded government bailouts.

A bank levy is a tax on all U.K. banks’ balance sheets, mostly their debts. Each year, the value of all funds deposited in the banks is assessed and taxed. This is done in order to maintain financial discipline and prevent outlandish spending, bonuses, or possible overly risky behavior. The levy is imposed to control the banks’ risky borrowing activities that contributed to the credit crisis. The proceeds from the tax are set aside by the government to create an insurance fund to bail out the industry in the event of a future crisis so as not to make taxpayers pay for bailouts.

The levy is calculated on total aggregated liabilities and equity excluding:

  • Borrowing backed by U.K. government debts
  • Ordinary deposits covered by the U.K.'s deposit insurance scheme
  • The first £20 billion of any bank's taxable debts

The bank levy rate for short-term chargeable liabilities is an annually decreasing rate and is set to decrease gradually over time to 0.10% in 2021. For the 2020 tax year, the bank levy for short-term chargeable liabilities is 0.14%. Long-term chargeable equity and liabilities are taxed at half these rates as they are deemed to be inherently less risky—0.07% in 2020 and dropping to 0.05% in 2021.

When should you empty your bank account?

  • The moment to empty your bank accounts is when a creditor gets a judgment against you

You may not get notice that your bank has been levied until your money is actually frozen, so the best way to protect yourself is to make sure that no money is in the account to be frozen.

Other Bank Levy or Garnishment Objection Arguments

Here are a few other arguments you might be able to raise in your paperwork.

You Need the Funds for Basic Living Expenses

Many people need every penny to make ends meet each month, and courts know this. You can argue that you need your entire bank balance for necessary living expenses. Many courts will consider this if you’re the primary caretaker of a child or other dependants.

The Creditor Has a Wage Garnishment

State and federal law limit the amount a creditor can take from your paycheck. In most cases, it’s 25% of wages after taxes. However, it can be more if the garnishment is for a domestic support obligation, taxes, or a student loan. If the creditor has already taken the maximum deduction allowed through your paycheck, tell the judge. The creditor shouldn’t be able to double-dip by hitting your bank account, too. Learn more about how much a creditor can take by wage garnishment.

The Levy Is for More Than You Owe

Sometimes mistakes are made. If you owe less than the bank plans to turn over to the creditor, let the court know. Also, you’ll want to object if you paid the judgment or agreed to pay in another way, such as through installment payments.

How to Stop a Bank Levy

There are a few ways in which you can stop a bank levy. Often, these various methods will require a substantial amount of proof. But it’s possible!

Options to stop a bank levy include:

  • The creditor has made an error
  • You are a victim of identity theft
  • There was not enough notice before the levy was put into place
  • The statute of limitations has expired
  • There has been an agreement made with your creditor
  • You have filed for bankruptcy
  • You receive mainly federal benefits as your primary form of income

Sometimes, there is no way out but to pay a levy and attempt to move on with your life. The best course of action is to avoid a levy on your bank account altogether. If a credit or debt collector is threatening you with a bank levy or legal action, file your response and make a defense fast!

How to Stop or Release a Bank Account Levy

You can stop a bank account levy, but you need to act quickly before the IRS seizes the funds. This link explores multiple ways to stop a bank account levy and protect your assets. The right option depends on your situation.

Frequently Asked Questions

What type of bank accounts cannot be garnished? There are only a few bank accounts in the U.S. that cannot be garnished. Almost every state in the U.S. allows a civil judgment creditor to garnish a bank account belonging to the judgment debtor. The laws of these states apply equally to any type of bank, whether it be a brick and mortar bank or internet bank. A bank that cannot be garnished would have to be solely located in a state that prohibits bank account garnishments. Otherwise, the creditor could serve a garnishment at a bank branch in an unprotected state. Learn more about asset protection techniques here. Can a creditor garnish your bank account without notice? Yes, in most states, a creditor can garnish a judgment debtor’s bank account without notice. If a creditor were required to give a debtor advanced notice that a judgment creditor was going to garnish an account, then the debtor would have the opportunity to empty the account in advance of the garnishment. Garnishments with notice would not be an effective collection tool. How do creditors find your bank account? Judgment creditors can find where a debtor maintains bank accounts by using post-judgment discovery, or discovery in aid of execution. Post-judgment discovery refers to the creditor collection tools that allow a creditor to find out where the debtor holds assets that are available to satisfy a judgment. These tools include inspection of the debtor’s tax returns, bank statements, financial records, and the debtor’s testimony under oath about his assets. There also are services that search national banking records to discover a debtor’s banking history. Can an LLC bank account be garnished? An LLC bank account can be garnished if there is a judgment against the LLC. However, if there is a judgment against the LLC owner, a creditor cannot directly garnish the bank account of the owner’s LLC. A creditor can obtain a charging lien against the LLC, prohibiting the LLC from distributing money from the LLC account to a debtor member. Can a creditor take all the money in your bank account? In most situations, a creditor can take all of a debtor’s money in the debtor’s bank account, if the money is not otherwise exempt, up to the amount of the judgment. However, money in the debtor’s garnished bank account that was deposited by a non-debtor who is co-owner of a joint bank account may be released from the garnishment freeze. The non-debtor has to go to court to assert ownership of his money in the joint bank account. For example, suppose a judgment debtor shares title to a bank account with an elderly parent. In that case, the judgment debtor may defeat the garnishment by asserting that the funds do not belong to him despite his name appearing on the account title. If your bank account is levied, can you open a new account? A bank account levy, or garnishment, is a proceeding against a bank to turn over to the creditor any amount the bank owes to the debtor (the account balance). However, the bank account garnishment is not an injunction on the debtor’s personal banking. In other words, the debtor may open up additional accounts, whether at the same bank or any other bank. Can a debt collector garnish a joint bank account? In general, a debt collector can garnish the debtor’s interest in a joint bank account. The creditor has this ability even if the joint owner is not liable for the judgment. In addition, if the money in the account is derived solely from the non-debtor joint owner, then the debtor whose name appears in the account title could prove that they have only bare legal title to the money and no equitable rights subject to garnishment. As stated above, joint accounts owned by married persons are exempt from garnishment directed at either spouse individually under the laws of Florida and a few other states. Can a savings account be garnished? Yes, a savings account can be garnished. A bank account garnishment makes no distinction between checking accounts, savings accounts, money-market accounts, online savings accounts, or CDs. It applies to all varieties of financial accounts. How often can a creditor levy a bank account? A creditor can repeatedly levy, or garnish, a bank during the life of a judgment. While the creditor cannot harass a judgment debtor, repeated levies or garnishments of bank accounts alone do not constitute harassment, especially if the funds in the bank account are generally not exempt. Protecting a bank account from creditor levy requires understanding the legal tools a creditor will likely use to freeze a debtor’s bank account and take the money in the account. How long can your bank account be frozen for? In a garnishment, a bank account is frozen until the garnishment process is fully resolved, which takes 1-4 months. There are many reasons why a debtor may claim exemption from garnishment of money in a bank account, including, for example, accounts holding retirement funds, social security, or entireties accounts in the case of a married debtor. Most states provide that money from an exempt asset retains its exemption after it is deposited in the debtor’s bank accounts. The debtor must claim and prove their exemptions in court. The legal process typically lasts at least a month, but could go on for two months or longer if the creditor fights the claim of exemption. How does a levy on a bank account work? In a bank account levy, a judgment creditor first gets a court to issue a writ of garnishment based on the amount of the judgment. A writ of garnishment is directed towards a particular bank. Then, the creditor serves the bank with the writ of garnishment. A bank that has been served a writ of garnishment must, with few exceptions, freeze all accounts belonging to the judgment debtor, even joint accounts. In Florida, the creditor must follow strict procedures when garnishing a debtor’s account. One of these procedures involves mailing the debtor a copy of the garnishment documentation, including a Claim of Exemption form. If the debtor files the claim of exemption, the debtor may be entitled to a hearing on the claim and could try to have the garnishment dissolved. How long does it take to garnish a bank account? Typically 1-2 weeks. Once a judgment creditor files a motion for a writ of garnishment, the court will typically issue the writ within a few days. Some courts/judges take longer than others. Once issued, all a creditor has to do is serve the bank garnishment documents, which does not take long. Can debt collectors see your bank account balance? A debt collection can see your bank account balance using post-judgment discovery. A judgment creditor has many tools to discover the precise nature and amounts of your assets. While a creditor cannot easily look up your bank account balance at will, the creditor can serve the bank with a writ of garnishment without much expense. The bank in response typically must freeze the account and file a response stating the exact balance in any bank account held for the judgment debtor. In addition, the judgment creditor can subpoena a bank for bank statements or other records, which would reveal a typical balance in the account.

Whats the difference between a levy and a garnishment?

Levies are usually used to take money from a debtor's bank account, while garnishments are court-ordered seizures of debtors' wages before they go into bank accounts.

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