We are an independent, advertising-supported comparison service. Our objective is to empower you to make confident financial decisions by giving you access to interactive tools and financial calculators, publishing original and unbiased content, and allowing you to conduct free research and information comparisons.
Issuers that Bankrate has partnerships with include American Express, Bank of America, Capital One, Chase, Citi, and Discover, among others.
A bank levy is not a one-time event. A creditor may make multiple requests for a bank levy until the debt is settled. Furthermore, the majority of banks charge their clients a fee for handling a levy on their account.
What is a bank levy?
A bank levy is a legal action taken by a creditor to obtain funds directly from a bank account to recover unpaid debts or taxes owed by an individual or business. Since the bank is required to freeze the account and surrender funds to fulfill the debt obligation, it is typically seen as a last resort when other attempts to collect from you have failed.
Understanding the process of a bank levy
While a bank levy sounds drastic, and it is, creditors have to jump through quite a few hoops to legally freeze your assets. For starters, the company or person you owe money to has to sue you in court and actually win the case. Once the money judgment has been granted, the creditor then becomes a judgment creditor, who can place a bank levy on your accounts.
Exemptions to bank levies
Keep in mind that not every account can have a bank levy applied to it. For instance, the following accounts are not liable to a bank levy according to federal law:
- Social Security benefits
- Supplemental Security income
- Veterans benefits
- Student loan disbursements
- Federal Emergency Management Agency (FEMA) aid
- Federal, civil service or railroad retirement benefits
Dealing with a bank levy
Dealing with a bank levy is never fun, and there’s not a lot you can do to make a rightful bank levy go away. Your best bet is figuring out a way to repay your creditor, whether that means trying to settle your debt for a lump sum that is less than what you owe or setting up a repayment plan they will agree with and following through.
Alternatives to a bank levy
If you’re facing a bank levy, there are a few things you can do to try to avoid it:
- Negotiate with the creditor. Try to negotiate with the creditor, suggesting either a repayment plan or a settlement offer for less than what you owe.
- Check if the debt is beyond the statute of limitations. If the debt is so old that it’s beyond the statute of limitations in your state, you can dispute the bank levy and have it removed.
- File for bankruptcy. Filing for bankruptcy can be a smart option if you’re overwhelmed with your finances and you can’t seem to get back on your feet. A bankruptcy attorney can help you figure out what your options are.
Frequently Asked Questions
How long does a bank levy last?
A bank levy lasts until the debt is paid in full. If the debt is not paid within a certain amount of time, the creditor may be able to garnish your wages or seize your assets.
Can a bank levy be lifted?
If the debt is fully paid, the creditor consents to the levy being lifted, or the court orders the levy to be lifted, then the bank levy can be removed.
What can I do to protect myself from a bank levy?
There are a few things you can do to protect yourself from a bank levy, including:
- Pay your debts on time.
- Negotiate with your creditors if you’re having trouble making payments.
- File for bankruptcy if you’re overwhelmed with debt.
Additional Resources
Remember, a bank levy is a serious matter. If you’re facing a bank levy, it’s important to seek legal advice as soon as possible.
What is a bank levy?
A bank levy is a court action used by a creditor to seize money straight out of a bank account in order to satisfy unpaid taxes or debts owed by a person or company.
The bank must freeze the account and turn over money in order to satisfy the debt, so this is usually the last option after other attempts to collect from you have been unsuccessful.
How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We always work to give customers the professional guidance and resources they need to be successful on their financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
By outlining our revenue streams, we are open and honest about how we are able to provide you with high-quality material, affordable prices, and practical tools.
Bankrate. com is an independent, advertising-supported publisher and comparison service. We receive payment when you click on specific links that we post on our website or when sponsored goods and services are displayed on it. Therefore, this compensation may affect the placement, order, and style of products within listing categories, with the exception of our mortgage, home equity, and other home lending products, where legal prohibitions apply. The way and location of products on this website can also be affected by other variables, like our own unique website policies and whether or not they are available in your area or within your own credit score range. Although we make an effort to present a variety of offers, Bankrate does not contain details about all financial or credit products or services.
- Legally, a bank levy enables creditors to take money out of your bank account in order to satisfy a debt.
- Certain types of accounts cannot be subjected to bank levies.
- Your state’s laws dictate how long a bank levy lasts.
During times of financial hardship, it’s not uncommon to fall behind on regular bills and debts you owe. However, if you fall behind on your payments for an extended period of time, you might encounter a bank levy, in which case any money you have in the bank gets “frozen” and becomes inaccessible to you.