Will a Creditor Use Wage Garnishment or a Bank Levy?

Creditors report delinquencies to the reporting agencies, and this information remains on a debtor's credit report for seven years. Debtors with no intentions of paying off a debt might wait for the negative information to fall off their records. However, creditors do have rights and they can take other action to collection past due money, such as requesting a wage garnishment or bank levy from the court.

Wage Garnishment

The process of wage garnishment involves an employer deducting a specific amount from a debtor's paycheck each week -- up to 25 percent of pay. Money taken from a debtor's paycheck is held and then sent to the debtor's creditor as repayment for a debt. Employers are under obligation to obey a garnishment order. Creditors can seek a garnishment order after acquiring a judgment against people who owe the company money. A local sheriff delivers the order to the debtor's employer.

Bank Account Levy

A bank levy is another option for creditors trying to collect a past due debt. This method does not involve a debtor's employer, but it does involve the debtor's bank account. Creditors must first acquire a judgment against debtors before conducting a bank levy. With permission from a judge, creditors can contact a debtor's financial institution and submit a request to levy or remove funds from the debtor's bank account. If the debtor owes $1,000 and there's only $400 in the account, creditors can take all funds in the account (leaving a zero balance), and then request additional levies from the court.

Consideration

Garnishments and bank levies are available to creditors as a last resort when a debtor ignores a judgment order to pay a debt. The decision to levy or garnish wages depends on numerous factors. For example, a creditor may pursue a garnishment if it does not have the debtor's personal banking information. Some creditors perform a skip trace of local banks to discover bank accounts. However, if the debtor doesn't have an account, or he has an account in someone else's name, the creditor cannot levy funds and may rely on garnishments to recover a debt.

Garnishment Restrictions

It is illegal for a creditor or debt collector to take money from paychecks or garnish wages in some states. Due to these restrictions, these creditors cannot ask the court for a wage garnishment. Instead, these creditors must rely on bank account levies to satisfy delinquent accounts. Creditors may keep a record of bank account information from checks written by a debtor or from online requests for checking account withdrawals. This information provides bank account numbers and benefits creditors who need to levy a bank account.