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 When you owe money and do not pay, you risk having any money in an account at a bank or credit union automatically withdrawn to pay your debt.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
Filing for a Chapter 7 or Chapter 13 bankruptcy will immediately stop a judgment or garnishment from proceeding. In fact, if funds are being held by the garnishee or have been disbursed to your creditor in the amount over $600 within 90 days of your bankruptcy filing, we can get the money back in your hands.
Is there a way around garnishment? ›
Filing for a Chapter 7 or Chapter 13 bankruptcy will immediately stop a judgment or garnishment from proceeding. In fact, if funds are being held by the garnishee or have been disbursed to your creditor in the amount over $600 within 90 days of your bankruptcy filing, we can get the money back in your hands.
What bank accounts in the US Cannot be garnished? ›
Under federal law, banks are generally prohibited from freezing a bank account and charging a garnishment fee if: (1) the debtor receives Social Security, Supplemental Security Income, Veteran's Pension, Federal Railroad Retirement, Civil Service Retirement, or Federal Employee Retirement System benefits; (2) such ...
Can a creditor take all the money in your bank account? ›
If you fail to make payments, creditors will try to recoup the funds you owe them. In some cases, they may take legal action and request a bank levy. This may freeze your bank account and give creditors the right to take the funds directly from it.
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.
What states prohibit garnishment? ›
State Garnishment Laws
While all states allow wage garnishment for child support and unpaid state taxes, four states — North Carolina, Pennsylvania, South Carolina and Texas — don't allow wage garnishment for creditor debts.
Can a garnishment be stopped once it starts? ›
The creditor will continue to garnish your wages until you pay the debt in full or take some measure to stop the garnishment, such as claiming an exemption with the court. Your state's exemption laws determine the amount of income you'll be able to keep.
Can foreign bank accounts be garnished? ›
Offshore banks are not subject to U.S. state court jurisdiction. A court cannot enter a garnishment order against a bank situated outside the United States. Moving funds to an offshore bank provides substantial leverage in settlement negotiations.
How do I protect my bank account from garnishment? ›
Maintain a bank account in a state that prohibits a judgment creditor from garnishing the bank. Open an offshore bank account to make garnishment complicated and expensive. Maintain an account with only exempt funds, such as social security or pension plan distributions.
What states are entirely immune from bank account garnishments? ›
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.
Collection agencies can access your bank account, but only after a court judgment. A judgment, which typically follows a lawsuit, may permit a bank account or wage garnishment, meaning the collector can take money directly out of your account or from your wages to pay off your 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.
Can a debt collector freeze all your bank accounts? ›
Again, while most creditors must get a judgment against you before they can have your accounts frozen, some don't. These include government agencies that collect federal and state taxes, as well as child support and federal student loans.
How do I hide money from a garnishment? ›
Instead, “hiding” assets wisely involves doing things like:
- Putting the assets in offshore accounts or trusts where your creditors may not know to look.
- Putting assets in places where they are unreviewable by creditors or lawsuit plaintiffs so they don't know how much money “you” have.
About bank levies
Some kinds of deposits can't be taken (they're exempt), like Social Security or Supplemental Security Income. Exemptions From the Enforcement of Judgments (form EJ-155) has a complete list. Enough money to meet basic needs must be left in the account. The exact amount changes every year.
Why should you never pay a collection agency? ›
By paying the collection agency directly, the notification of the debt could stay on your credit report longer than if you attempt to use another option, like filing for bankruptcy. When institutions check your credit report and see this information on it, it may harm your ability to obtain loans.
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.
What is the most they can garnish from your paycheck? ›
Federal Wage Garnishment Limits for Judgment Creditors
If a judgment creditor is garnishing your wages, federal law provides that it can take no more than: 25% of your disposable income, or. the amount that your income exceeds 30 times the federal minimum wage, whichever is less.
How to write a letter to stop 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.
6 Options If Your Wages Are Being Garnished
- Try To Work Something Out With The Creditor. ...
- File a Claim of Exemption. ...
- Challenge the Garnishment. ...
- Consolidate or Refinance Your Debt. ...
- Work with a Credit Counselor to Get on a Payment Plan. ...
- File Bankruptcy.
