A bank levy occurs when a creditor freezes a consumer’s checking account and subsequently removes the amount it is owed. According to the U.S. Department of the Treasury, unless the creditor in question is a government creditor, such as the IRS, a judgment and court order are required before an individual’s checking account can be frozen and a bank levy executed. Certain forms of income, however, are exempt from being seized.
Funds that are Exempt from a Bank Levy
* Government benefits - Benefits that individuals receive from the U.S. government as a means of support, such as Social Security, Social Security disability, government retirement benefits, unemployment payments and welfare are all exempt from being garnished by private creditors.
* Child support - Child support is received with the understanding that the funds will be directed to the care of a minor child. As such, child support is exempt from garnishment.
* Life insurance benefits - If an individual has received life insurance benefits due to being the beneficiary of a deceased loved one, those funds cannot be intercepted or garnished.
How to Declare Funds that are Exempt from Garnishment
Should a creditor win a lawsuit against a consumer, that consumer should immediately inform his bank which funds within his account are considered exempt by the U.S. government. In many cases, it is beneficial for the consumer to move any exempt funds to another checking account, as the checking account containing the exempt income may be frozen prior to non-exempt income being seized
Most banks have a form available for consumers to fill out stating their exempt assets and the amount of income they have coming into the account each month that should be neither frozen nor seized by a judgment creditor. If an individual knows that he may be the subject of a frozen checking account and garnishment order, it is in his best financial interests to request this form from the bank and fill it out promptly so that the bank knows how much of the individual’s income must be legally withheld from the judgment creditor during a bank levy.
What to Do if Exempt Income is Seized from a Bank Account
Debtors who suffer a seizure of their exempt accounts via a bank levy should immediately contact the court that awarded the judgment and file a claim for wrongful garnishment to have the funds returned to the checking account from which they were garnished (See Government Garnishment Laws).
In most cases, however, individuals are informed ahead of time that they will be subject to bank levy either by a certified letter or by the simple fact that their checking account has been frozen at the request of a judgment creditor. It is at this point that all consumers who fear a bank levy should inform their banks of their exempt assets. Any proof that a consumer can provide detailing the amount of exempt assets he is entitled to each month will help prevent those funds from falling into the hands of a judgment creditor.
Individuals should keep in mind as well that not all states permit judgment creditors to garnish checking accounts in order to recover an old debt. The attorney general’s office of each state can inform residents of specific state laws concerning bank levies.
SOURCE:
http://personal-debt-management.suite101.com/article.cfm/fight-a-frozen-checking-account
Funds that are Exempt from a Bank Levy
* Government benefits - Benefits that individuals receive from the U.S. government as a means of support, such as Social Security, Social Security disability, government retirement benefits, unemployment payments and welfare are all exempt from being garnished by private creditors.
* Child support - Child support is received with the understanding that the funds will be directed to the care of a minor child. As such, child support is exempt from garnishment.
* Life insurance benefits - If an individual has received life insurance benefits due to being the beneficiary of a deceased loved one, those funds cannot be intercepted or garnished.
How to Declare Funds that are Exempt from Garnishment
Should a creditor win a lawsuit against a consumer, that consumer should immediately inform his bank which funds within his account are considered exempt by the U.S. government. In many cases, it is beneficial for the consumer to move any exempt funds to another checking account, as the checking account containing the exempt income may be frozen prior to non-exempt income being seized
Most banks have a form available for consumers to fill out stating their exempt assets and the amount of income they have coming into the account each month that should be neither frozen nor seized by a judgment creditor. If an individual knows that he may be the subject of a frozen checking account and garnishment order, it is in his best financial interests to request this form from the bank and fill it out promptly so that the bank knows how much of the individual’s income must be legally withheld from the judgment creditor during a bank levy.
What to Do if Exempt Income is Seized from a Bank Account
Debtors who suffer a seizure of their exempt accounts via a bank levy should immediately contact the court that awarded the judgment and file a claim for wrongful garnishment to have the funds returned to the checking account from which they were garnished (See Government Garnishment Laws).
In most cases, however, individuals are informed ahead of time that they will be subject to bank levy either by a certified letter or by the simple fact that their checking account has been frozen at the request of a judgment creditor. It is at this point that all consumers who fear a bank levy should inform their banks of their exempt assets. Any proof that a consumer can provide detailing the amount of exempt assets he is entitled to each month will help prevent those funds from falling into the hands of a judgment creditor.
Individuals should keep in mind as well that not all states permit judgment creditors to garnish checking accounts in order to recover an old debt. The attorney general’s office of each state can inform residents of specific state laws concerning bank levies.
SOURCE:
http://personal-debt-management.suite101.com/article.cfm/fight-a-frozen-checking-account
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