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Can a Creditor Levy Your Bank Account More Than Once?

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In a Nutshell

A bank levy is a legal move that allows creditors to collect a debt by taking money directly from a borrower’s bank account. Creditors can continue to take money from your account until your debt is paid off. Although this process can seem scary, this article will educate you on how to be prepared for a levy and what your rights are.

Written by Todd Carney, J.D. Harvard Law 2021.  
Updated October 12, 2021


Having debt is never fun. It’s tough enough to keep up with living expenses, and now you have more bills to pay. But if you default on your debt payments, creditors can try to collect the funds in different ways. One process is a bank levy, where lenders can take money from your bank account to clear your debt. Creditors can continue to take money from your account until your debt is paid off. Although this process can seem scary, this article will educate you on how to be prepared for a levy and what your rights are.

The Bank Account Levy Process Can Happen Quickly

A bank levy is a legal move that allows creditors to take money from a borrower’s bank account, such as a checking account, a savings account, or a certificate of deposit account. Creditors are entities that loan you money, like a credit card company, a mortgage lender, or an auto dealer. Creditors can levy a bank account for debt collection or back taxes that the owner of the account has failed to pay. 

Lenders are only allowed to take money from your account after they receive a court order. So a creditor needs to sue and get a monetary judgment against the debt. If the lender gets this court judgment, they are called a judgment creditor.

After getting the judgment, the lender will be able to levy your bank account within a week or two. This timeline can vary since some courts are faster than others in issuing a writ of execution, which allows for the levy. After the ruling, the creditor will notify the bank of the judgment. Then the bank will freeze your account and send the money in it to the judgment creditor to cover the debt. 

Florida law calls this process a bank account garnishment. But other states refer to it as a bank levy and save the term garnishment for wage garnishments. This is similar to a bank levy, but instead of taking money from your account, they take money directly from your paycheck.

It’s important to note that certain government creditors, such as the IRS and Department of Education, don’t need a court judgment to go after your account. This is because the money is owed directly to the government.

Your Bank Account Can Be Levied More Than Once

A levy doesn’t necessarily happen just once. 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 simply need to prove that the debt hasn’t been fully repaid. 

If the debtor only owes a small amount of money to the creditor after the first seizure, there’s a chance that the judgment creditor may decide it’s not worth their time to go after the remaining money. But if there is a large outstanding balance, it’s likely the creditor will keep pursuing your account until the debt is repaid. So, if your bank account was levied, it’s good to see if the judgment creditor’s latest action paid off your debt or if you still owe some money. Checking this helps you to know if your bank account may be subject to further action.

The Debt Collector Doesn’t Have To Give You Notice

Neither the creditor nor the bank is legally required to provide notice before placing the levy on your account. This is because if someone was notified that the money in their bank account was going to be seized, they would likely withdraw all the money from their account before the creditor could access it.

But to issue a levy, the debt collector needs to have brought a lawsuit against you for the money that you owe. So you’d likely have at least some idea that you could face a levy. At this point, you’d probably know you owe money because you would’ve faced calls from a collection agency or similar collections actions. 

With this in mind, it’s crucial that you don’t ignore lawsuits brought against you or legal documents sent to you. A notice of legal action or legal documents could be the only notification you’ll get about a potential levy. This notification could come weeks or even months before a creditor tries to levy your account. If you receive legal notices, you should seek legal advice on how to deal with the situation.

What You Can Do To Fight a Bank Levy

The easiest way to get rid of a levy is to pay off the debt. But that may not be possible. There are also defenses you can use to contest a bank levy. First, if there is a creditor error, you can and should object to the levy and try to prevent the creditor from accessing your bank account. The creditor may have made an error regarding the amount of money you owe or they may be reporting that you owe money when you don’t.

Additionally, if the creditor didn’t give you appropriate legal notice, such as by filing a lawsuit, you may have the right to stop legal proceedings regarding your debt.

If someone committed identity theft and took out credit in your name, that’s also a defense you can use. You will need to show that you are a victim of identity theft and that you never used the credit that was taken out in your name.

Sometimes, the statute of limitations will have passed with particularly old debt. If so, then the creditor may not be able to legally seize your account. This can be a bit complicated though. There are many factors that impact whether the debt is subject to a statute of limitations, including the state you live in, which laws the credit agreement includes, and the kind of debt.

Filing bankruptcy will at least temporarily stop a bank levy. Even if you cannot afford a bankruptcy attorney, you can still file bankruptcy using Upsolve’s free online tool.

You can also stop using the bank account. This doesn’t prevent the levy, but if you are not increasing your account balance, then the creditor will only be able to get so much cash. This can give you time to decide how to deal with your financial troubles.

If you can’t pay the debt all at once, but you want to pay off the debt and avoid a bank levy, you can negotiate a payment plan with the creditor. This will often prevent or stop a bank levy. Instead of letting creditors escalate their efforts to collect, it's smart to contact them to create a plan as soon as you begin having financial issues.

If the IRS has a levy against you that’s creating significant financial problems for you, you can contact them to request a levy release and have the levy lifted. When requesting the release, you’ll need to submit several documents proving your financial situation. If the IRS denies your request, you can appeal it. 

Exempted Funds

Some of your money may be exempt from being levied. When the creditor raises a levy against your account, the bank is required to figure out whether your account has any protected funds. Determining which funds are protected can be complicated since many people deposit money from several different sources. As a result, it’s not uncommon for financial institutions to make mistakes regarding which funds have exemptions. So you may need to make a claim of exemption.

Federal law exempts federal benefits or payments, such as:

  • Social Security benefits

  • Supplemental Security Income (SSI)

  • Federal pensions or retirement benefits

  • The disbursement of student loans

Child support payments you receive may also be exempt from a bank levy. But if you’re behind on making child support payments, it may be easier to remove that money from your bank account.

Let's Summarize…

If you default on a debt, a creditor can sue you and get a judgment to take funds directly from your bank account to pay off your outstanding debt. Levies often happen more than once. They keep recurring until the debt is paid off. Neither the bank nor creditor needs to notify you before they place a levy on your bank account. If you have a valid defense, you can dispute a levy. Also, not all types of funds can be levied. Some funds are exempt. It’s crucial that you don’t ignore or miss any legal notices. These may be your only hint that a levy is coming. You should also be familiar with the laws on levies and garnishments in your state.



Written By:

Todd Carney, J.D. Harvard Law 2021

LinkedIn

Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such as RealC... read more about Todd Carney, J.D. Harvard Law 2021

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