Bank Levy Laws

If you don’t pay your debts or you have unpaid taxes, the creditor or the Internal Revenue Service can levy your bank account. A bank levy is when a creditor freezes all or a portion of the money in your bank account. There are certain laws that pertain to bank levies. The bank will, after a period of time, turn the frozen funds over to the creditor as payment for your delinquent debt.

Time Frame

When the IRS levies your bank account, the bank will not immediately turn the money over to agency. There is a waiting period of 21 days before the bank releases the money to the IRS, which gives you a chance to contact the IRS and reach a resolution. Once a bank levy has been issued by the IRS, it is very difficult to cancel. Your best plan of action is to contact the IRS and make arrangements to pay delinquent taxes before a bank levy is issued.


After the money has been removed from your account, the bank levy will be canceled. Your account then returns to its normal status, which means you will have access to the account once again. However, if the money paid to the creditor is not sufficient to pay your outstanding debt, the creditor or the IRS can issue another bank levy.

Bank Location

You can open another bank account, with another bank, but the creditor or the IRS can do an asset search or perform skip-tracing activities to locate your new bank account. Skip tracing is a function used by debt collectors to locate a debtor or his assets. They can locate your bank even if you move to another state. Sometimes an offshore bank account can be levied. Once the account has been located another bank levy can be issued.

Joint Ownership

If your bank account is a joint account and a bank levy is issued, neither account owner will have access to the account. No one will be able to withdraw any money from the account. When there are checks outstanding, and a bank levy is issued, the checks will bounce and be returned for insufficient funds.


Certain funds are exempt from a bank levy such as unemployment benefits, child support, disability payments, Social Security payments, VA benefits, workers' compensation payments, and welfare payments. It will be up to you to prove that your sources of funds are exempt. If your account is levied, contact the court for instruction about filing an exemption.