When a creditor has obtained a judgment against you, one of the typical methods creditors use to collect on the judgment is a levy on a bank account. You will generally receive a Notice of Levy indicating which accounts the creditor is levying to satisfy the judgment. There are several steps you can take to stop the bank levy and have the funds returned to you. If a creditor has levied your bank account you can stop the bank levy through:
Filing a Claim of Exemptions
Filing for Bankruptcy Protection
Both of these tools provide important protections that can help you keep your assets and stop creditor action. If your funds are social security benefits then you should visit our blog on:
How to Protect Social Security from a Bank Levy?
Can My Social Security or SSI Be Garnished?
Filing a Claim of Exemptions in California
Typically when a creditor levies a bank account the account will be frozen and the bank will hold the funds for a period of 10 days. During this period you can file a claim of exemptions that may allow you to have the funds returned to you.
First Step- Are Your Funds Exempt
Under California law certain types of income and funds are exempt from creditor collection and are not subject to a bank levy. The following funds are exempt from a bank levy:
This is not an exhaustive list of all the types of funds that you can exempt from a bank levy. You can find a more complete list of the funds that you may exempt here:Exemptions from Enforcement of Judgments
Step Two-Complete Forms for Claiming Exemption
If your funds are exempt from levying then you need to fill out the following 3 forms within 10 days of the bank levy. You must provide the completed forms to the sheriff’s office listed in the Notice of Levy.
You should make 3 copies of the following documents once you have completed the forms and bring them to the sheriffs office that is designated on the Notice of Levy.
Whether you will need to attend a hearing will depend on whether the creditor objects to your claim of exemptions. If the creditor does not object then the levied funds will be returned to you. If the creditor objects to the claim of exemptions then a hearing will be set. At the hearing the judge will review the claim of exemptions and determine whether you are entitled to claim the exemptions. The judge will either:
Grant the Claim of Exemptions and Return the Funds to You
Deny the Claim of Exemptions and Allow the Creditor To Continue with the Levy.
Please be aware that even if the claim of exemptions is granted, this does not mean that the creditor cannot seek to levy additional bank accounts or other funds. When the claim of exemptions is allowed it only means that the funds that were levied were exempt. It does not mean that the judgment is not valid or that other funds cannot be levied.
Filing for Bankruptcy in California
When you file for bankruptcy protection the automatic stay stops any potential or current bank levies. The creditor must cease all collection efforts including efforts to collect on a bank levy. If there is a pending bank levy and the sheriff or creditor is holding funds, then your attorney may utilize several different methods to try to obtain the funds back:
If the funds are with the creditor:
Preference Action-your attorney may be able to file a preference action in bankruptcy court if the amount of the levied funds is $600 or over in the last 90 days. The creditor will be required to return the funds to you if the action is successful.
If the funds are with the sheriff:
Motion for Turnover of Personal Property -If the funds are being held by the sheriffs office then the sheriff may release the funds to you, or require a court order for the funds to be returned. If you have a legal right to the property then your attorney can file a Motion for Turnover of Personal Property.
If a creditor is levying your bank account, it is important that you take the necessary steps to protect your property and family. Seek legal advice on how you can stop a bank levy and protect yourself from future bank levies.
Do You Need Help to Stop a Bank Levy?
Norma Duenas has represented more than 3,000 individuals and couples in filing forChapter 7andChapter 13 bankruptcy. Her focus is on ensuring that clients understand how bankruptcy works and whether it is the right option for their unique financial circ*mstances.
Ms. Duenas’ approach is to present her valued clients with the best possible options available to resolve their financial problems and to help them rebuild their financial future. Ms. Duenas is a member of the National Association of Consumer Bankruptcy Attorneys and has an Excellent rating among clients on Avvo.com. Her law office is also part of the Better Business Bureau and has an A rating.
As part of meeting with Norma Duenas you will fill out a questionnaire in person or online from home that will help us evaluate your financial situation and determine if bankruptcy can eliminate your debts and stop creditor collection efforts. Our founding attorney, Norma Duenas provides a free phone or office consultation up to one hour to review your facts, answer your questions, and provide you with all possible options.
If you need further assistance or to schedule a free phone or in-person consultation, please call us at 866-337-7220 or email us if calling us is not practical or it’s after hours.
If your money is exempt, you must act quickly to stop the bank levy. You must send a Claim of Exemption within 15 days of when you received the Notice of Levy (20 days if you received it in the mail). If you wait longer than this, the sheriff will give the other side the money and you won't get it back.
When the IRS takes money out of your bank account (levy) or your paycheck (wage garnishment), you have options. You can get the IRS to remove the levy, but only after you pay off all the back taxes you owe, or set up a payment agreement with the IRS.
Some kinds of deposits can't be taken (they're exempt), like Social Security or Supplemental Security Income. Exemptions From the Enforcement of Judgments (form EJ-155) has a complete list. Enough money to meet basic needs must be left in the account. The exact amount changes every year.
If you act quickly, you may be able to get some or all of the money back. You have only 10 days from the date of the levy to file a claim of exemption (plus 5 days if the notice was sent by mail) with the sheriff. You must show that the funds taken came from a source of income that is exempt from collection.
The debtor may object to the levy by filing a claim of exemption within 10 days if you were served personally. You have 15 days to respond if you were served by mail. Proceeds from the Sheriff's sale are used to pay: Money owed to the original lender if there is one.
Try to negotiate with the creditor, suggesting either a repayment plan or a settlement offer for less than what you owe. Check if the debt is beyond the statute of limitations. If the debt is so old that it's beyond the statute of limitations in your state, you can dispute the bank levy and have it removed.
If your money is exempt, you must act quickly to stop the bank levy. You must send a Claim of Exemption within 15 days of when you received the Notice of Levy (20 days if you received it in the mail). If you wait longer than this, the sheriff will give the other side the money and you won't get it back.
A levy on deposits held by a bank applies to those funds on deposit at the time the levy is made, up to the amount of the levy, and is effective as of the time the levy is made. No withdrawals may be made on levied upon deposits during the 21-day holding period, or any extension thereof.
There are many times when a debtor does not have enough funds in a bank account to cover the entirety of a debt to a creditor. When a debt is not paid through a single bank levy, a creditor is allowed to place more than one bank levy on an account or on multiple accounts of a single debtor.
The fastest way to stop a bank levy is to pay the balance in full. Once you pay the balance, the creditor can no longer levy your account, but unfreezing your account may take extra time. If you have the funds to pay in full, contact your creditor to set up the payment and release the levy.
You may appeal before or after the IRS places a levy on your wages, bank account, or other property. After the levy proceeds have been sent to the IRS, you may file a claim to have them returned to you. You may also appeal the denial by the IRS of your request to have levied property returned to you.
Templates and Forms. If you receive notice from your bank that funds have been withdrawn due to a court judgment (“levied”), and you want to object, act fast. You have 15 days (20 days, if you were served by mail) to file a Claim of Exemption.
How Long Does A Bank Levy Last? A Writ of Execution that precedes the bank levy is valid for just 180 days. Still, this is nearly half a year, and it gives judgment creditors the time they typically need to complete the process of garnishing money from your bank account, in many cases.
County and State Public retirement and pension benefits, including death benefits and judgments and awards of back payment of these benefits, in general. Exempt. An exception exists for judgments of child, spousal, or family support, so that these may be collected from public pensions and retirements.
If you're a sole proprietor or partner, or you signed a personal guarantee for a debt, the judgment creditor could also garnish your wages and take money from your personal bank account, as well as take your nonexempt personal property, to pay off the debt.
As for how to remove a legal hold on bank accounts, you do have a few options, including reviewing your bank's policy or contacting your bank. You could also simply wait it out.
As a consumer, you are entitled to file a lawsuit against any bank, credit union or other creditor who violates your rights under the EFTA. In short, the EFTA allows a consumer to recover their actual damages, statutory damages of up to $1,000 and their attorney's fees and costs.
If the creditor did not properly serve you notice of the lawsuit and default judgement, it may provide grounds for reversal. Proper service means you must have been personally served with official notice of the lawsuit and court proceedings.
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