Account Garnishment
Having debt can be stressful. When you owe money and do not pay, you risk having any money in an account at a bank or credit union automatically withdrawn to pay your debt. This is called bank account garnishment or bank account levy.
Creditors trying to collect commercial debtmust go to court to get an order of bank account garnishment. Commercial debt is anything not owed to the government or for child support or alimony. This type of creditor is often called a judgment creditor. If the court rules in the creditor’s favor, an order of account garnishment is sent directly to your bank or credit union. Judgment creditors often win orders of wage garnishment because people don’t show up to court. When thathappens, the courts generally find for the creditors.
There are no federal limits to the amount that can be taken in account garnishment. Your state may have laws that are more protective.
Some sources of income are considered protected in account garnishment, including:
- Social Security, and other government benefits or payments
- Funds received for child support or alimony (spousal support)
- Workers’ compensation payments
- Retirement funds, such as those from pensions or annuities
- Amounts received as the result of a personal injury lawsuit
- A certain percentage of wages
When a bank account garnishment order is issued for overdue child support or delinquent taxes, these exemptions may not apply. Banks or credit unions that receive garnishment orders must review the deposit records for the two months beforethe order to make sure amounts deposited from protected sources are exempt from account garnishment.
Once a bank or credit union receives an order for account garnishment, you funds are frozen. This means you can’t get them. You cannot use your debit card to purchase groceries. You cannot get money from an ATM. Any checks you have written may bounce or automatic payments made from your checking account may be unpaid. This is done to prevent you from withdrawing all ofyour funds before the creditor can be paid.
If this happens, consider getting legal help. Also, contact anyone you have written a check to or have an automatic payment scheduled with and explain the situation. If you have protected sources of income, be sure to explain this.
What are some ways to avoid account garnishment?
- Pay your debts if you can afford it. Make a plan to reduce your debt.
- If you cannot afford to pay your debt, see if you can set up a payment plan with your creditor. Account garnishment is expensive and time consuming for creditors. By offering to set up a payment plan, you are potentially providing them with a cheaper route to collecting money from you.
- Challenge the garnishment. For judgment creditors, this means going to court when they sue you. For the federal or state government, this means requesting a hearing.
- Do no put money into an account at a bank or credit union.
- See if you can settle your debt. Settling a debt is not without risks. But, again, because wage garnishment is expensive and time consuming, the creditor may accept partial payment. Just remember, you may end up owing income taxes on any part of the debt that is forgiven.
- Consider bankruptcy. If you think this is your best option, consult a lawyer. If you don't make much money,you may be able toget help from a legal aid attorney or an attorney through your community’s pro bono attorney network.
FAQs
- Pay your debts if you can afford it. Make a plan to reduce your debt.
- If you cannot afford to pay your debt, see if you can set up a payment plan with your creditor. ...
- Challenge the garnishment. ...
- Do no put money into an account at a bank or credit union.
- See if you can settle your debt. ...
- Consider bankruptcy.
Call and write your bank or credit union
Next, call your bank or credit union and say you have revoked authorization for the company to take automatic payments from your account. Customer service should be able to help you, and your bank or credit union might have a form for this online.
What states prohibit bank account garnishment? ›
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.
Is there a way around garnishment? ›
If you are facing or even experiencing a garnishment, don't despair – there are solutions. You can stop a garnishment by: Paying off the debt in full. Filing an objection to the garnishment with the court if you have legal basis, such debt was a result of fraud or identity theft.
Can a creditor take all the money in your bank account? ›
The creditor won't necessarily see your exact account balance. However, if the amount they need to withdraw is available and they have a court judgment that allows them to do this, they can take that money directly from your account.
How can I stop a garnishment once it starts? ›
If wage garnishment means that you can't pay for your family's basic needs, you can ask the court to order the debt collector to stop garnishing your wages or reduce the amount. This is called a Claim of Exemption.
Can I open another bank account if mine was levied? ›
While your levied account is frozen, you can open a new one. Be sure to move any automatic bill payments that you've set up to the new account so that you don't miss any payments and fall deeper into debt.
How can a creditor wipe your bank account without notice? ›
A judgment creditor does not have to give you specific notice before freezing your bank account. However, a creditor or debt collector is required to notify you (1) that it has filed a lawsuit against you; and (2) that it has obtained a judgment against you.
How much money can a creditor take from your bank account? ›
Creditors are limited to garnishing 25% of your disposable income limit for most wage garnishments. But there are no such limitations with bank accounts. But, there are some exemptions for bank accounts that are better than the 25% rule allowed for wages. This article will discuss the defenses to a bank account levy.
What money Cannot be garnished? ›
In addition to federally and state-provided assistance, things like child support payments, student loans, workers compensation and pension funds are also exempt. If you have less than two months' worth of certain benefits in your account, these are automatically exempted.
Once a creditor gets a judgment against you, it can ask the court to issue an order directly to the bank to freeze your bank account through a "writ of garnishment." Another common way for a creditor to freeze your accounts is to ask the court for a "turnover receiver." A receiver is a third-party appointed by the ...
Can a bank garnishment be reversed? ›
Grounds for Reversing a Bank Garnishment
If the creditor did not properly serve you notice of the lawsuit and default judgement, it may provide grounds for reversal. Proper service means you must have been personally served with official notice of the lawsuit and court proceedings.
How do I write a letter to stop wage garnishment? ›
At a minimum, your written objection to the garnishment should include the following information:
- the case number and case caption (ex: "XYZ Bank vs. John Doe")
- the date of your objection.
- your name and current contact information.
- the reasons (or "grounds") for your objection, and.
- your signature.
Federal law places limits on how much judgment creditors can take. The garnishment amount is limited to 25% of your disposable earnings for that week (what's left after mandatory deductions) or the amount by which your disposable earnings for that week exceed 30 times the federal minimum hourly wage, whichever is less.
Can you negotiate a wage garnishment? ›
Try to negotiate
A wage garnishment judgment can be costly and time-consuming for a creditor to obtain and for you to appeal, so reaching a payment agreement early on, if at all possible, is recommended.
Can my wife's bank account be garnished for my debt? ›
a judgment creditor of your spouse can garnish your joint accounts, and. if you have your own separate bank account and a judgment is taken against your spouse, that creditor can also garnish your separate account to pay for your spouse's debt.
How do creditors find your bank accounts? ›
A judgment creditor will review any payments previously made by the debtor. If they have written you a check in the past, the check will have their bank's information. Or, if you've made a payment to the judgment creditor (such as a prior bill), they will be able to see where the payment came from.
