How to Stop a Bank LevyStop IRS garnishment and bank levies based on your bank and state's laws.

Monkey Business Images / Shutterstock.com

If a creditor is taking legal action to recover debt you owe, it can enact a levy and freeze your bank account so it can withdraw funds. If your account doesn’t have enough in it to cover that debt and you have direct deposits going in, the creditor can keep taking money from it until your debt is paid. Most creditors need to get a court order to levy your bank account but some federal organizations, like the Internal Revenue Service, can simply send you a letter letting you know it will levy your account if you don’t pay in full.

If you’re concerned about a creditor interfering with your bank accounts, here’s what you need to know about how to stop automatic withdrawals from your bank account due to a levy or garnishment.

Options for Stopping a Bank Levy

So, what is a levy? A bank levy, also known as a bank garnishment, occurs when a creditor files a document — a writ of garnishment or writ of execution — and sends it to your bank and local law enforcement. Bank levies begin in the courtroom when a judge determines a creditor has the right to collect money from you for a past-due account. To recover debt, government agencies typically use levies, and private creditors use wage garnishments.

A creditor can continue filing levies until you repay the amount you owe. In addition to paying off your debt, you will incur a bank levy fee. If you think you’ve been wrongfully subjected to a bank levy or if it will cause you economic hardship, you do have some options to stop it:

  • Bank levy reversal: If the IRS is garnishing your bank account, you have 21 days to get help to reverse the levy. You can work with a tax professional or attorney to protect your money and have the IRS return any funds it has already taken.
  • Settlement negotiation: If you can’t reverse an IRS or other creditor’s bank levy, you can try to settle the debt. Consider working with a debt relief counselor to put together a payment plan proposal or settlement amount offer.
  • Hardship plan: If you have a tax liability with the IRS and paying it will cause you immediate economic hardship, you might be able to get the levy released by following the IRS appeals process. If you’re successful, you’ll have to make payments to pay off your balance. You might also be able to declare hardship by filing bankruptcy — under Chapter 13, the debt becomes part of your repayment plan and is not subject to garnishment.
  • Partial payment or installment plan: If you notify the IRS or creditor that you’re unable to pay your debt and you have no money in your account to seize, you might be in a better position to set up a payment plan. In some states, if you can’t pay your tax bill, you can make an offer in compromise, or settlement offer, to pay your debt.

Bank Account Garnishment Laws and How the Bank Levy Process Works

The levy process typically starts with the court entering a judgment against you and issuing an order to garnish your bank account. The creditor sends the garnishment order to your bank, and your bank is required by law to freeze your account for a specified period of time, which means you cannot withdraw funds from it.

If you owe more than the amount you have in your bank account and you have direct deposits being deposited, the bank has the right to pay your creditor with those funds until your account is paid in full. This could wipe out your bank balance or leave you with an outstanding debt.

Find Out: 7 Tips for Paying Off Back Taxes

In some states, you’ll receive a notice of levy when the judgment is issued, but it can also happen without notification. If you’re notified, contact an attorney and follow the instructions on the garnishment notice — make sure you inform the judge if you have any bank levy exemptions. For instance, if you’re receiving state benefits — such as a public assistance, workers’ compensation or retirement benefits — you might be eligible for an exemption.

Unless you claim an exemption within a certain period of time, the bank will freeze the funds and give the money to the sheriff. Even though some of your funds might be exempt from a levy, the judgment will remain in effect and accrue interest each year until you pay off your balance. The amount of interest and time you have to claim your exemption varies by state.

Claiming Bank Levy Exemptions

You can stop an IRS garnishment or the bank levy process if your funds meet certain requirements. Bank levy laws vary by state, but the following federal benefits are exempt from a bank levy, according to the Federal Trade Commission:

  • Social Security benefits
  • Supplemental Security Income benefits
  • Veterans benefits
  • Civil service, federal retirement and disability benefits
  • Military annuities and survivor benefits
  • Student assistance
  • Railroad retirement benefits
  • Merchant seamen wages
  • Longshoreman and harbor worker death and disability benefits
  • Foreign service retirement and disability
  • Compensation for injury, death, or detention of employees of U.S. contractors outside the U.S.
  • Federal Emergency Management Agency federal disaster assistance

Learn: How to Find Out If You Have Debt in Collections

Bank Account Garnishment Laws by State

Figuring out bank levy laws by state can be tricky, so it could be worthwhile to work with a professional. Some questions you might want to ask a lawyer or financial advisor include:

  • How can I get my levy released?
  • What happens when I pay off my debt?
  • How long does a bank levy last and what does notice of levy mean?

In some states, certain sources of money in your bank account are exempt from garnishment. For example, in Colorado, 75 percent of wages and 100 percent of disability, unemployment, Social Security benefits and other types of funds are exempt from creditors’ levies. In other states, you might be able to protect your bank account from garnishment if you receive SSI, veteran or other federal benefits. Some states provide “wild card” exemptions up to a certain dollar amount, which typically ranges from $500 to $10,000.

Make sure you get professional advice regarding the bank levy laws in your state and how a writ of execution on your bank account will affect you. A lawyer can increase your chances of stopping a bank levy, but you have only 10 days after your bank account is frozen to file an exemption, so don’t waste time — find help immediately.

Joint Account Levies

If you share a bank account with a spouse who doesn’t owe money to a creditor, he’ll also be subject to a bank levy if you fail to pay your debt. Creditors can generally garnish a joint account for the full balance but in some states, your spouse’s funds might be protected.

If you can prove that all the funds in the account are your own contributions — such as your paycheck, government pension benefits or even insurance payments — the other account holder might not be held responsible for paying the balance.

Don’t Miss: 5 Signs You Aren’t Ready to Combine Finances With Your Partner

Comments
  • Jaime

    To have this happen would be horrible:(

  • queen

    what if you write a balance check to cover the lien on your account and take the cash out

    • Gina Respert-Elrod

      You didn’t give much more information, but from what I gather, what you are talking about is called “kiting.” This IS a federal offense, don’t do it. I used to work for a bank, and we were trained to notice this type of transactions a fraud.

  • crying

    my husbands VA disability check was just transfered when the levy went into effect.
    I need help. I thought VA disability checks and SS checks were exempt.

    • they did it to me too and noooo they are not suppose to.its fixable but what a hassle that should of never been?

    • Martha

      What bank? TDBank does not follow the law. They claim to abide by federal law, however, any additional state laws that do not counter (opposite to) federal law are also enforceable. Generally, child support is covered as an exemption to levy by state laws.TDBank will take a levy fee of $125 every time they look at your account to satisfy the Writ, however, they take the fee even when there is no money to satisfy the creditors levy, thus making themselves the only party benefiting from the levy. This is illegal. Unfortunately, banks apparently seldom get reprimand for this practice. See if your area has legal aide or if you can file an order to NOTICE AND DEMAND FOR RESTORATION OF ACCOUNT

  • Richard Ramey

    Nobody ever mentions taking your money out of the bank before they raid it and putting it in a safe in your home, then filing bankruptcy later

    • Joe WallStreet

      Or plunking some of it in pre-paid credit cards.

    • Barbi

      I asked my bank if I can withdrawal it and they told me know since they have an order to freeze account for garnishment until court in September.

  • messed up

    my father is being sued by a rental company. They have frozen one of my accounts that his name was also on. He was sent a letter by this bank concerning some his personal accounts, but I was never received any notice. Well they froze my account. This account was only used for my unemployment benefits direct deposit. It sounds like I can get this money back. What steps would I have to take to do this?

  • Barbi

    Ok, I lost my job in 2010 cuz the economy shut the doors. Since then I had a bad surgery and I had put it on a credit card to pay for it. Now they put a freeze on my bank account, but I am not working and the only money that I had in there was from my student loan, which can be proved. I tried to pay my bill and it was declined. Can someone help me here? It was only $538 and it is all I have from my school money, since I can’t work due to having very sick boys 🙁 I’m lost anyone know what I can do to get my account unfroze and fast?

  • nelly

    what if your name is added to a non-profit organizations checking account as an authorize user of the debit card and a signature on checks written?

  • guest

    i have no worked since may due to a spinal cord injury called my debt collector and my workmanscomp checks are being levied. i went to the grocery store and my bank card was lack of funds then i recieved a letter my account has a levy on it.now no food no money.i am going to file bankruptcy as i can not work but without a job on workmans comp can i? i am getting hungry waiting on my next check that i will cash at walmart because the bank would take that check from me,right?

  • guest

    go to legal aide to file chapter 13 bankruptcy( not! chapter7) that will unfreeze your bank account account. my all my workmans comp checks were taken.and told the collector i was n workmans comp took a judgement out after i told them and put the levy. you have 21 days act fast or the money is gone.

  • Stephanie Ramirez

    the franchise tax board levied my bank account for restitution I owed for when I went to prison…. the money I had in the bank was my financial aid money so now I have no money for gas to get to school and that is my only source of money… does anyone know if they can touch my financial aid money?

  • so upset

    TD Bank not only froze my account for a levy and charged me $125 fee but they also told me they put a hold for double the amount of the levy because that is their policy. How can they do that????

  • Freebird

    Why are all of the articles on Garnishment/Levy written to ‘protect’ the debtor? The debtor signed the contracts that gave them the loan or the merchandise, etc. but when they choose not to pay for these things they are given advise on how to get out of it and make the creditor look lilke the bad guy….why is that? I am a Judgment Creditor and I am owed over $100,000 by my ‘ex’ because he decided he just didn’t want to pay alimony any more (after leaving me, his family, his pets, and our 23 year ‘life’ behind so that he could marry a woman 20 years younger than me and start a new family which includes IVF twins, at 50 years old!!!). So I have sued him and he is now in Contempt of Court and I have just recently garnished his bank account for the $47,000 he had in it. It’s a shame that the debtors are made to look like these poor, innocent people who are getting side-swiped by the creditors when in reality they are the ones that have done wrong and have been hiding from their responsibilities!!!

    • kitty

      Because un forseen things happen in life that changes a person’s situation. It then becomes more important to survive rather than becoming homeless or going hungry. Debtors should be protected, they are the ones who feel the downturn much more than the big businesses.

      • kitty

        This is true in many business debts, but personal debts and domestic issues all have different circumstances. If a parent isn’t supporting their child then there must be something worked out where they can pay something each month depending on their income.

    • John Bailey

      Maybe he left you because he didn’t want to keep working his ass off to give your heartless, bitchy, vindictive ass the “life” you wanted and decided to go live the life he deserved. And there you are leeching every last penny he’s worked for, and you’ve probably never had a real meaningful job in your life. I know people like you, and you’re all the same. Debtors need protections because taking all of someone’s money can get them thrown on the street for something that happened years ago, creditors write their debts off and endure substantially less hardship than a common middle American person, and you can’t deny that. The CEO of Wells Fargo isn’t going to be left sleeping on a park bench over a debtor’s failure to pay. The system is created to protect them more than the debtor anyways because they can just write it off. The fact that you can’t see that only bolsters your self-delusions.

  • Do unto others

    Wells Fargo is notorious for just allowing anyone to send in a letter saying, “take money from this person’s account.” This has happened to me twice and in both instances I was never contacted by any court nor did I receive any phone calls or letters. It would have been nice for the person who spent all their time tracking me down to at least call and ask if I could pay it or if I could make a partial payment. I would have been more than happy. The first time this happened it was from a scam artist for magazines saying I owed them from they year 2006! I didn’t know anything about this until 2013. I opened up a Wells Fargo account last year as a backup to another account. Why is Wells FArgo the only account that these levies keep coming from is beyond me. Protect yourselves and make sure to research and ask questions. Many times these corporate types figure the common man/woman to be idiots.

    • Luis Carlos Vásquez Donado

      I just don’t believe you were not served. Impossible to go forward. you must’ve thrown the letter away thinking it was just another letter asking for the money.

      • john doe

        Nope I too bank at Wells fargo and I also had a collection agency levy my bank account and when I called the agency they had the wrong address for me. I was irate that they wouldn’t have made the letter of notice one you would have to sign for. They claimed they never got a returned letter and wouldn’t work with me to release the levy.

  • Luanne

    This is good info. Thank You ! Bank of America charged me $100.00 to process a levy against me. This charge caused my checking account to become overdrawn. Then they charged me an additional $35.00 overdraft fee. Can I also challenge these bank fees?

  • Stressed

    If you have a writ of execution on your bank account can you close out your bank account?

  • NN

    Are bank levies account specific or wide
    spred.