A levy against your bank account can wipe out your savings, cause you to overdraw your account and hurt your credit rating. A bank levy is designed to collect a debt that you owe and your bank must comply with the law and continue to remove cash from your account until your debt has been paid. There are several important considerations to examine on how to handle a bank levy.
Receive notice from your bank of levied funds. When a creditor wants to levy your account, he must serve notice to your bank. The bank can immediately freeze those funds, but it must wait 21 days before forwarding levied funds to a creditor. The holding period is designed to help the bank determine account ownership, something that may not be clear if multiple names are on the account. On the day following the holding period, the frozen funds are removed from your account and sent to the creditor.
Challenge the levy or pay up. If you believe that the bank levy is a mistake, then notify your financial institution of this mistake. If a debt must be settled with a creditor, you can make arrangements with your creditor to make payments or allow the frozen funds to be forwarded once the holding period has expired. You can also challenge the levy if the funds in your account are not derived solely from employment income. For example, if some of the monies in your bank account are for child support, then you must prove how much of the commingled funds are for child support.
Contact an attorney. If you are faced with multiple bank levies and have ongoing financial problems, contact an attorney for guidance. Filing for personal bankruptcy may be your only course of action to handle a large debt that you cannot repay. Even if your situation is not so dire that bankruptcy is necessary, contacting an attorney for assistance is advisable.
If you were erroneously levied, your creditor or taxing authority should restore your funds and pay bank penalties. Ensure that an erroneous levy does not appear on your credit reports, a move that can lower your credit score.
- If you were erroneously levied, your creditor or taxing authority should restore your funds and pay bank penalties. Ensure that an erroneous levy does not appear on your credit reports, a move that can lower your credit score.
Matt Keegan has worked as an editor since 1992. He has edited technical manuals, newsletters and articles for several aviation and automotive companies and is currently the editor and publisher of "Auto Trends Magazine." Matt earned a Bachelor of Science in Business Administration from Ramapo College of New Jersey.