Bank Account Levy Limits

If you default on your debts, your creditor has the right to sue you for the amount of the debt. If you do not appear in court, or the court determines the debt is legitimate, it enters a judgment against you for the amount of the debt. Creditors can then ask the court to garnish your wages or levy your bank account. Levying your account is the most serious form of collection activity because your creditor can take your entire balance.

Judgment Amount

Bank levies are not limited to a certain percentage of the assets in the bank. Instead, the limit is set by how much money the court judgment states the defendant must pay. For example, if a judgment is for $10,000, the creditor can levy the bank account until the $10,000 is paid. Thus, if you have less money in your account than you owe, the levy remains in effect until the entire balance is paid off; the creditor can take whatever is currently in your bank account as well as additional deposits.

Last Resort

Although there is no limit to the amount a creditor may garnish via a bank levy, except for the amount specified in the judgment, creditors often use bank levies only as a last resort. If a creditor puts a lien on your property or garnishes your wages, he knows he will eventually get his money. If these options are not available, creditors may use a bank levy to attempt to get their money back immediately.

Bankruptcy

If a debtor files for bankruptcy, she receives an automatic stay, which stops creditors from taking collection action against the debtor, including placing levies on bank accounts. However, you should not file for bankruptcy for the sole purpose of stopping a creditor from levying your bank account, as the bankruptcy courts frown upon people using bankruptcy to evade collection activity and may dismiss your bankruptcy case if you do this.

Process

Creditors cannot instantly levy your bank account. If you do not have income that a creditor can garnish via a wage garnishment, the creditor may place a skip trace to find out where you live and contact banks in your area to determine where you are banking. The creditor must then get a writ of execution from the court ordering your bank to withhold funds from your account. The bank must freeze funds for 21 days before turning them over to the creditor. The creditor must notify you of a levy; normally it does so after serving the writ of execution on your bank so you cannot withdraw all your money to avoid a bank levy.