Bank Levy Guide
A bank levy (also called bank account levy or bank garnishment) allows creditors to freeze and seize funds from a debtor's bank account to satisfy a judgment. This guide explains how bank levies work, exemptions, timelines, and strategies for both creditors and debtors.
Education Only: This content is for educational purposes and does not constitute legal advice. Bank levy laws vary by state. Consult with a licensed attorney for guidance specific to your situation.
What Is a Bank Levy?
Definition
A bank levy is a legal process where a creditor obtains a court order directing a bank to freeze a debtor's account and turn over available funds (up to the judgment amount) to satisfy the debt.
Unlike wage garnishment (which is ongoing), a bank levy is typically a one-time seizure of whatever funds are in the account at the time the levy is executed.
Court Order
Creditor obtains levy order from court
Bank Freezes Account
Bank freezes debtor's account immediately
Funds Transferred
Bank sends funds to creditor after waiting period
How Bank Levies Work
Creditor Identifies Bank Account
Creditor discovers where debtor banks (through debtor examination, subpoena, or previous payment records).
Creditor Files Levy Paperwork
Creditor submits writ of execution or levy order to court with bank information.
Court Issues Levy Order
Court approves levy and sends order to bank (and notice to debtor in some states).
Bank Freezes Account
Bank immediately freezes account balance up to judgment amount. Debtor cannot access frozen funds.
Waiting Period for Exemptions
Debtor has limited time (typically 10-30 days) to file exemption claim if funds are protected.
Bank Transfers Funds
If no exemption filed or exemption denied, bank sends frozen funds to creditor.
Protected Funds & Exemptions
Exempt Funds
Certain funds are protected from bank levies under federal and state law. If your account contains exempt funds, you can file an exemption claim to release them.
✅ Generally Protected
- • Social Security benefits
- • Supplemental Security Income (SSI)
- • Veterans benefits
- • Disability benefits (SSDI)
- • Unemployment benefits
- • Workers' compensation
- • Child support payments received
- • Certain retirement account funds
❌ Not Protected
- • Regular wages deposited in account (unless recently deposited and traceable)
- • Savings from non-exempt income
- • Business account funds
- • Investment account balances
Proving Exemptions
Critical: You must act quickly to claim exemptions. The burden is on you to prove funds are exempt.
- •File exemption claim with court within deadline (often 10-30 days)
- •Provide documentation (benefit award letters, bank statements showing direct deposits)
- •Attend court hearing if required
- •If exemption approved, bank releases frozen funds back to you
Typical Timeline
From Filing to Fund Transfer
For Collectors: Using Bank Levies
Advantages
- ✓Immediate seizure of available funds
- ✓No debtor cooperation required
- ✓Can levy multiple accounts if discovered
- ✓Strong leverage for settlement negotiation
Disadvantages
- ✗Requires knowing bank account information
- ✗One-time seizure (not ongoing like garnishment)
- ✗Debtor may have exempt funds or low balance
- ✗Filing costs ($100-400 per levy)
For Debtors: Responding to Bank Levy
Immediate Actions
- 1.Review frozen funds: Determine if any funds are from exempt sources (Social Security, disability, etc.).
- 2.File exemption claim immediately: If funds are protected, file exemption paperwork with court before deadline.
- 3.Gather documentation: Collect proof of exempt income (benefit letters, direct deposit records).
- 4.Contact creditor to negotiate: Offer settlement or payment plan to release levy and prevent future levies.
- 5.Open new account if needed: Consider opening account at different bank to protect future deposits (but don't hide assets illegally).
Preventing Future Levies
Proactive Strategies
The best way to avoid bank levies is to resolve the judgment before enforcement begins:
- •Negotiate early: Contact creditor immediately after judgment to propose settlement or payment plan
- •Make consistent payments: Even small voluntary payments show good faith and may delay enforcement
- •Keep exempt funds separate: Use dedicated account for Social Security or disability benefits
- •Maintain communication: Don't ignore creditor contact—engagement creates negotiation opportunities
Need More Guidance?
Explore our comprehensive resources, tools, and templates for judgment collection and resolution.