How to Avoid Creditors Seizing Your Bank Account

If a creditor threatens to seize or levy your bank account, take action. You have several options for protecting your funds, including working out a payment plan, segregating protected funds and proving financial hardship to the court. As a last resort, you can also file for bankruptcy, which stops all collection activity, including asset seizures.

Instructions

1

Contact your creditor directly to work out a payment plan or negotiate a settlement. Ideally, you should do this before the creditor files a lawsuit, as most creditors must win a lawsuit against you before they can seize your assets. If you prevent a lawsuit from occurring, you eliminate the risk of a bank account levy. If a creditor successfully sues you, you should still attempt to work out a direct payment arrangement. Since levying an account requires additional paperwork and trips to court, your creditor may still be willing to work with you.

2

Segregate protected funds from the rest of your assets. Some assets cannot be garnished by most creditors, including Social Security income, unemployment compensation and, in many states, retirement and pension funds. However, it is up to you to protect these funds by placing them in a separate account from your other assets and then notifying the court, and your creditor, that the funds in this separate account cannot be levied.

3

File a hardship exemption request with the court. In many states, you can protect your financial assets by showing the court that their seizure would result in a serious financial hardship for you or your family. Forms for requesting a hardship hearing are available at the courthouse. Be prepared to document your hardship claim with copies of recent bills, pay stubs and bank statements that show your household income and expenses.

4

Talk to a bankruptcy lawyer. If you truly cannot pay your debts and do not anticipate being able to do so in the near future, bankruptcy may be your best option. Once you file for bankruptcy, an "automatic stay" against your creditors goes into effect. This prevents your creditors from contacting you about your debt and stops wage and bank account garnishments.