Can I Get Money Back From an Account Levy?

Not all creditors are honorable about levying or garnishing the bank account of someone who owes them money, although the law restricts them to some extent. A creditor cannot seize certain types of income, but that doesn't always stop it from trying. If a creditor takes money from your account that it has no right to, you do have some recourse.

The Levy Process

A levy can't happen without warning. The creditor would first have to get a judgment against you. Since this involves a lawsuit and a court appearance, you'd receive a copy of those documents in the mail. If you default and don't respond to the lawsuit, or if you lose in court, you'll have a judgment against you, allowing your creditor to levy against your account. The simplest way to prevent this is not to place any money in that account once you have warning of the judgment. This doesn't relieve you of responsibility for paying the debt, but it at least allows you to repay the debt on your own terms.

Joint Accounts

Assuming that there is money in the account, if it's not all yours, you can sometimes prevent the creditor from levying the portion that doesn't belong to you. A joint account with someone else is vulnerable if your Social Security number appears on it and a creditor can legally garnish it. However, the creditor cannot take money deposited into the account if it's placed there by someone with a different Social Security number.

Exempt Funds

Depending on the source of your income, the money you contribute to the account might also be exempt from levy. For example, a creditor cannot levy funds from Social Security, veterans' benefits, welfare income or unemployment payments. It can't take workers' compensation income from you, or child support you receive for your dependent children. Several other exemptions exist, as well, so if you find yourself in this predicament, consult an attorney as immediately as possible to find out if any apply to you.

What To Do

You have a limited amount of time to try to get your money back. In most states, when a levy takes effect, the bank "freezes" the money in your account. This means it's still there, but you just can't use it. This might be the status quo for up to two weeks or more, allowing you time to object to the levy. Collect all evidence you have that the levy is illegal, such as evidence of someone else's deposits to a joint account, or proof of the nature of your income that makes it exempt. Copy everything and submit the proof to both the creditor and your bank, along with a written explanation of why those funds should be released from "frozen" status. Ideally, the creditor will agree and give the bank the authority to "unfreeze" that portion of the money. If this doesn't work, you'll have to seek a refund of the money through the court. Generally, before the bank can release your money to the creditor, the creditor must file for court approval of the transaction. You can then file an exemption claim with the court, objecting to the transfer. In this case, you'll also need adequate proof of why the creditor should not have the money it has levied.