Can Creditors Take Money From Your Bank Account?

When a person owes a large sum of money to another party, the person's creditors have a number of avenues of legal recourse. In some cases, a creditor may seek an order from a court allowing him to garnish wages from a debtor's bank account. While the creditor can legally take some funds from a bank account, many forms of income are exempt from garnishment.

Features

According to the New York City Department of Consumer Affairs, if a creditor sues a debtor and the judge rules in the creditor's favor, the creditor has a right to attempt to satisfy this judgment by collecting the money owed him. The creditor can then receive permission from a court to seize funds from the debtor's bank account. The first step in this process is to serve papers on the institution with whom the account is held.

Freezing

Before money from a bank account can be garnished, the bank account must be frozen. When a bank account is frozen, all or a part of the funds in it are rendered inaccessible to the account holder. While the creditor is required to notify the debtor that it has received a judgment against him, neither the creditor nor the financial institution is required to notify the debtor before freezing the account.

Garnishment

After a bank account has been frozen, the creditor may then attempt to remove funds from the bank account. Rules regarding the methods by which the creditor may remove money and the amount of money that he may remove varies according to state law. According to BankRate, usually a creditor must attain and serve a writ of execution on the bank. Some states have limits on how much money a creditor can remove. In New York, for example, a creditor must leave some money in the bank account, regardless of the size of the debt.

Exemptions

A number of sources of income, particularly federal benefits, cannot be frozen or garnished. These include Social Security benefits, veterans' benefits, student assistance, emergency assistance from the Federal Emergency Management Agency, unemployment benefits, and many other forms of retirement and disability benefits.

Solutions

According to the Neighborhood Economic Development Advocacy Project, if exempt funds have been illegally frozen or garnished, a debtor can petition a court to have them unlocked or returned. Similarly, in some states, such as New York, funds necessary for paying for basic necessities, such as food and rent, cannot be withdrawn and, if taken, must be returned.