A levy against your bank account gives your creditor the right to recover money awarded to her in court. A 2011 federal regulation, however, exempts several fund sources from the levy. State laws may exempt more. Before the bank or the sheriff's department hands the funds over to your creditor, you have at least 10 days to file an objection to the levy.
Garnishment vs. Levy
Strictly speaking, if the money is taken from your bank account, it's a levy, not a garnishment, which is an attachment against your wages. When your wages are garnished, a portion go directly to your creditor before your employer issues your paycheck; by law, however, a portion of what you have earned must go to you. A bank levy, however, is potentially more dangerous because pending the bank's investigation of the levy, it may freeze your account, in which case you cannot withdraw funds at all.
Necessary Court Order
Before a creditor can take money from either your wages or your bank account, the creditor must get a court order authorizing the action. You will always be notified of a court action pending against you and of the judgment of the court. If the judge rules against you, the notice will be titled "Notice of Garnishment" or "Notice of Levy." From that point on, you won't be notified further, nor is your authorization required by either your bank or the creditor. You'll simply get a paycheck for wages minus the garnishment amount, or you'll discover that your bank account is frozen and that checks written on the account are returned.
What Happens Next
Depending upon how much you owe, the bank freeze extends to some or all of your funds. Alternatively, in some jurisdictions, the levied funds may be removed from the account and held by the sheriff for 10 days before being forwarded to your creditor. This gives you a brief window to claim an exemption that prevents your creditor from receiving the funds.
Claims of Exemption
When you receive the Notice of Levy, it may include another document, the Exemptions from the Enforcement of Judgments. Otherwise, you can obtain the document from the court. The form lists exempt assets. These include any federal benefit payments and 75 percent of employment wages. You can also ask for an exemption on the ground that you need the money in the account for the basic necessities of life. You may have additional exemption rights under state law. The form must be returned with a postmark of 10 or fewer days from the postmark on the Notice of Levy.
- Nolo: What's the Difference Between a Garnishment and a Levy?
- Sacramento County Public Law Library: Claim of Exemption from Bank Levy
- Federal Register: Garnishment of Accounts Containing Federal Benefit Payments
- Consumer Financial Protection Bureau. "Can a Debt Collector Garnish My Bank Account or My Wages?" Accessed Dec. 5, 2019.
- Consumer Financial Protection Bureau. "What Is a Judgement?" Accessed Dec. 5, 2019.
- Internal Revenue Service. "What Is a Levy?" Accessed Dec. 5, 2019.
- Federal Trade Commission Consumer Information. "Garnishing Federal Benefits," Accessed Dec. 5, 2019.
- Office of the Comptroller of the Currency. "What Can I Do If My Bank Account Is Frozen and It Includes Social Security or Other Federal Benefit Payments?" Accessed Dec. 5, 2019.
- Office of the Comptroller of the Currency. "Are My Federal Benefits Automatically Protected By My Bank From a Garnishment Order?" Accessed Dec. 5, 2019.
- Internal Revenue Service. "What You Need to Know: The Federal Levy Payment Program," Accessed Dec. 5, 2019.
- Federal Trade Commission Consumer Information. "Coping With Debt: Self-Help," Accessed Dec. 5, 2019.
- Consumer Financial Protection Bureau. "What Is the Best Way to Negotiate a Settlement With a Debt Collector?" Accessed Dec. 5, 2019.
- Federal Trade Commission Consumer Information. "Coping With Debt: Debt Relief Services," Accessed Dec. 5, 2019.
- Consumer Financial Protection Bureau. "My Debt Is Very Old: Can Debt Collectors Still Collect?" Accessed Dec. 5, 2019.
I am a retired Registered Investment Advisor with 12 years experience as head of an investment management firm. I also have a Ph.D. in English and have written more than 4,000 articles for regional and national publications.