Creditors can take aggressive action to seize control of accounts held by individuals who owe them money. Depending on the laws of the state in which the creditor and the debtor are located, the debtor may find property held by third parties levied or, in the case of cash flows, garnished. While you may have your own property levied or garnished if you are a beneficiary of the property, another person's property cannot be seized for your debt.
Garnishments and Levies
When a person has a cash flow garnished, the cash flow is diverted from the intended recipient -- the debtor -- to another party -- the creditor to whom he owes money. When a creditor seizes assets of the debt held by a third party -- such as stocks held by a broker or accounts held with a bank -- this is known as levying the debtor's assets.
Beneficiary Accounts
If you have a beneficiary account, meaning an account from which you receive regular payments, a portion of this account may be seized by the debt collector. If you have title to the account, the whole account could theoretically be seized. However, if you only receive payments from the account, only the payments could be garnished.
Non-Ownership Accounts
A person can also be a beneficiary of an account he does not currently own, but which he will inherit in the future. For example, a person may be a beneficiary of an account left to him in another person's will. A debt collector has no right to seize an account a person does not actively own or receive money from, on the expectation that he will receive money from it in the future.
Considerations
Laws regarding garnishments and levies vary widely from state to state. The only way to be sure whether a certain asset can be garnished or levied by a creditor is to check with a debt counselor or an attorney who practices debt law. If the IRS is seeking the levy, speak to a tax attorney.
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