Debt collectors may be able to access your bank account to get money you owe. In most (but not all) cases, the collector must get a court order to take money from your account. It generally takes one-to-two weeks for banks to execute a garnishment order.
Wage Garnishments
The employer is required to withhold 25 percent of the taxpayer's gross wages. The wage garnishment remains in effect for subsequent pay periods until the total amount of the garnishment has been withheld and remitted by the employer.
If you did not receive a notice about the garnishment of your account, ask your bank for a copy of the garnishment order that it received. You can also contact the creditor or the court that issued the order for more information.
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.
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.
There are limits to what the sheriff can take from a bank account. Some kinds of deposits can't be taken (they're exempt), like Social Security or Supplemental Security Income. Exemptions From the Enforcement of Judgments (form EJ-155) has a complete list. Enough money to meet basic needs must be left in the account.
When the levy is on a bank account, the Internal Revenue Code (IRC) provides a 21-day waiting period for complying with the levy. The waiting period is intended to allow you time to contact the IRS and arrange to pay the tax or notify the IRS of errors in the levy.
Debt collection thresholds vary widely and depend on several factors. While there's no legal minimum, practical limitations often determine the smallest debt amount collection agencies will pursue.
How can I stop a wage garnishment? You may be able to stop it by filing a claim of exemptions. This usually works if: You have bring home less than $1,000 per paycheck.
It must serve you in person, but it can also serve any adult living in your home, or it can leave the summons with your boss or human resources department. If you don't respond to the summons, the creditor is going to get judgment. Once it has judgment, it can start garnishing you.
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.
If your wages or bank account have been garnished, you may be able to stop it by paying the debt in full, filing an objection with the court or filing for bankruptcy.
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.
Withholding Wages
The employer must distribute garnished wages to the creditor, or the creditor's attorney, within 15 days after the close of the employee's last pay period. The law limits the amount of earnings that can be garnished to 25 percent of the employee's disposable income.
If your money is exempt, you must act quickly to stop the bank levy. You must send a Claim of Exemption within 15 days of when you received the Notice of Levy (20 days if you received it in the mail). If you wait longer than this, the sheriff will give the other side the money and you won't get it back.
What Accounts Can the IRS Not Touch? Any bank accounts that are under the taxpayer's name can be levied by the IRS. This includes institutional accounts, corporate and business accounts, and individual accounts. Accounts that are not under the taxpayer's name cannot be used by the IRS in a levy.
The court will apply the relevant means test before it makes an order for garnishment. Certain types of income cannot be garnished or frozen in a bank account. Foremost among these are federal and state benefits, such as Social Security payments.
The bottom line. While debt collectors may not automatically sue over a $3,000 credit card debt, they have the right to pursue legal action if they believe it's a viable option.
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.
What States Prohibit Bank 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.
If you refuse or don't provide them by the IRS deadline, the IRS can summons the records directly from your bank or financial institution.
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.