If you've been sued for an unpaid debt, the court may allow your creditors to directly withdraw funds from your bank account via a levy. With an account levy in place, you may be unable to access all your funds. In some circumstances, it may be possible to have the levy on your account lifted.
Can a debt collector withdraw funds from your bank account without your approval? No. Debt collectors can ONLY withdraw funds from your bank account with YOUR permission.
No matter who you owe, there will always be some amount of warning before they take an action as extreme as having your accounts frozen. If you owe money to a credit card company, for example, they must first receive a judgment against you in court before they can freeze your bank account.
Negotiate with Creditors: Sometimes, creditors are willing to negotiate a settlement or payment plan that could lead to the release of your funds. File a Motion: In some cases, you might need to file a motion with the court to release the freeze. Your attorney can assist with this process.
If you owe more than the creditor got with their first levy, they can keep pursuing levies until the debt is fully paid. Though the judgment creditor does need permission from the court to do this, it's pretty easy for a judgment creditor to get additional court approval.
If this is the reason for the freeze, the account will likely remain frozen for roughly 21 days while the court determines how much money can be taken out. In order to freeze your account, a creditor has to successfully sue you for unpaid debt first.
However, involuntary or statutory liens can also be created when a creditor seeks legal action for nonpayment of a debt. For example, a court can place a lien on the debtor's assets, including property and bank accounts.
Can debt collectors see your bank account balance or garnish your wages? Collection agencies can access your bank account, but only after a court judgment.
Bank accounts solely for government benefits
Federal law ensures that creditors cannot touch certain federal benefits, such as Social Security funds and veterans' benefits. If you're receiving these benefits, they would be exempt from garnishment.
Bank garnishment is legal in all 50 states. However, four states prohibit wage garnishment for consumer debts. According to Debt.org, those states are Texas, South Carolina, Pennsylvania, and North Carolina.
Debt collectors can only take money from your bank account with your authorization or with a court order. If you did not authorize the debt collector and if you did not receive notice of a lawsuit and court hearing, then the debt collector is violating the law.
Most states or jurisdictions have statutes of limitations between three and six years for debts, but some may be longer. This may also vary depending, for instance, on the: Type of debt. State where you live.
Ordinary garnishments
Under Title III, the amount that an employer may garnish from an employee in any workweek or pay period is the lesser of: 25% of disposable earnings -or- The amount by which disposable earnings are 30 times greater than the federal minimum wage.
You won't be able to transfer or withdraw money from a frozen bank account. To restore access, you may need to verify your transaction history or repay your debt.
Failure to Release Funds
If the bank will not release funds that are legally yours, you might have a valid legal claim.
They might also hire asset search companies that use public records and databases to locate accounts. In some cases, creditors can subpoena your employer for information about direct deposits. Once they identify a bank account, creditors can seek a court order to freeze or garnish it.
Undiscovered liens can result in high fines and even foreclosure on the home you worked so hard to obtain. Creditors should make all possible attempts to notify property owners of liens placed on their property but some liens can still go unnoticed so homeowners must take steps to protect themselves.
Most creditors must file a lawsuit and get a judgment against you before freezing your bank account. If the creditor wins the suit, the court issues a money judgment to the creditor. This money judgment serves as proof of the amount owed.
If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
However, the general rule is that debt collectors, even with your details, cannot simply remove funds from your account without specific authorization. Typically, they require something known as a 'bank levy' to access your account.
How Debtors Can Protect Bank Accounts. Debtors can protect their bank accounts by opening accounts in states that prohibit garnishments. If a creditor attempts to garnish the account, the debtor's funds remain protected while they handle legal proceedings or claims for exemptions.
If you continue not to pay, you'll hurt your credit score and you risk losing your property or having your wages or bank account garnished.
You may or may not be notified that the levy is in progress. To add insult to injury, banks may even charge you a fee to process the levy. Some bank levies remain on an account until the debt is paid or the levy is lifted. A levy can be used more than once, even on the same account.