A levy allows the creditor to take funds directly from a bank account to satisfy unpaid debts or taxes. In most cases, levies are permitted only by court order as part of a lawsuit judgment. However, certain government agencies, including the Internal Revenue Service, can levy a bank account without a court order.
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.
You can stop a bank account garnishment by filing a claim of exemption or objecting to the garnishment in court. To challenge the garnishment, you must prove: The funds in the account are exempt (e.g., Social Security, disability, or other protected income). The creditor failed to follow proper legal procedures.
Call and write your bank or credit union
Tell your bank that you have “revoked authorization” for the company to take automatic payments from your account. You can use this sample letter . Some banks and credit unions may offer you an online form.
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.
To withdraw consent, simply tell whoever issued your card (the bank, building society or credit card company) that you don't want the payment to be made. You can tell the card issuer by phone, email or letter. Your card issuer has no right to insist that you ask the company taking the payment first.
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.
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.
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.
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.
If the creditor keeps withdrawing funds from your bank account after you tell them that they no longer have your permission to make withdrawals, you may have the right to sue that debt collector for violation of your consumer rights.
If you have unpaid credit card debt, medical bills, or personal loans, you may be at risk of being sued and having your bank account levied.
Failure to Release Funds
If the bank will not release funds that are legally yours, you might have a valid legal claim.
The debt collector may try to collect the money by taking money from your bank account or your paycheck. You can challenge this, but you must act quickly. You may be able to undo, or set aside, this judgment if you didn't know about it or in a few other situations.
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.
The Short Answer: Yes. Share: The IRS probably already knows about many of your financial accounts, and the IRS can get information on how much is there. But, in reality, the IRS rarely digs deeper into your bank and financial accounts unless you're being audited or the IRS is collecting back taxes from you.
When your bank receives a court order of garnishment, it usually takes a week to 14 days to implement. Once in place, you won't be able to withdraw funds, and any checks you write (or have written) should be bounced, leaving you with Not Sufficient Funds fees.
Benefits paid to veterans and their families are non-taxable. These include: Education, training, and subsistence allowances. Disability compensation and pension payments for disabilities.
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.
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.
Both state and federal laws prohibit unauthorized withdrawals from being taken from your bank account or charges made to your credit card without your express consent having first been obtained for that to occur. Some laws require this consent to have first been obtained expressly in writing.
Write directly to the vendor/merchant to request no further debits to your checking account. You should provide the bank with a copy of the letter and inform the bank that these charges are no longer authorized. Keep a copy of the letter for your records.
In general, locking your debit card won't stop transactions that were made and authorized before you locked it but are still pending. In other words, if you made a purchase that's pending, then locked your debit card before it completed, that transaction should still go through.