How to Avoid Bank Garnishment

A bank garnishment, or levy, occurs when a creditor or tax agency seizes a portion of the amount in a debtor's bank account in order to pay a debt. This is different from a wage garnishment, where deductions come directly from a debtor's paycheck. Although most creditors must obtain a court order before serving a notice of levy, tax agencies, such as the Internal Revenue Service, do not. Once a bank receives a notice of levy, it must freeze funds in the account for a specified period, after which the funds become the property of the creditor. Receiving a bank garnishment is a serious matter and one you should take steps to avoid.

Instructions

1

Pay the debt immediately. Although the money in the account is no longer available to you upon receipt of the garnishment order, you still have time to pay the debt before your bank transfers funds to the creditor. The time for most creditors varies by state, but for the IRS it is 21 days. Paying the debt will release the garnishment. Since you may not qualify for a personal loan to cover any outstanding debts, start looking for alternative sources of money. Savings accounts, loans you can take against a life insurance policy or retirement account, personal items of value you may be able to sell, or family members who may be willing to lend a hand are all potential sources for relief.

2

Contact the creditor and try to negotiate a payment plan. A bank garnishment does not happen overnight. Most often, a debtor has avoided numerous attempts by the creditor to speak with him regarding the debt and a garnishment becomes a means of a last resort. Be honest about your situation and how much you can afford to pay.

3

Get legal advice or representation if you have tried but failed in negotiating with a creditor. Find a lawyer who offers a free initial consultation. Gather all your financial information and present it to the lawyer. Many times a lawyer can succeed where you cannot.

4

Appeal the garnishment. The appeal process varies by state, particularly when the creditor is a business such as a credit card company. The notice of garnishment you receive will include instructions for the appeal process. If the creditor is the Internal Revenue Service, you must file a Request for a Collection Due Process Hearing (IRS form 12153). List all reasons why the garnishment is in error. Normally, once the IRS receives this request, it will lift the garnishment until the appeal process is completed. You have 30 days from the date your levy begin to file an appeal but the sooner you do this, the better.

5

File for bankruptcy protection. Once your creditors, including the IRS, receive a Notice of Commencement regarding Chapter 7 or 13 bankruptcies, all attempts to collect a debt, including garnishment, must stop. To file a notice of bankruptcy you can either contact a lawyer or file the forms yourself.