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 When you owe money and do not pay, you risk having any money in an account at a bank or credit union automatically withdrawn to pay your debt.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.
5 Ways to Stop a Garnishment
- Pay Off the Debt. If your financial situation is dire, paying off the debt may not be an option. ...
- Work With Your Creditor. ...
- Challenge the Garnishment. ...
- File a Claim of Exemption. ...
- File for 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.
How do you 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.
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.
Which 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 wage garnishment? ›
What's your first name? Still, you have certain rights in the garnishment process. If you receive a notice of a wage garnishment order, you might be able to protect or exempt some or all of your wages by filing an exemption claim with the court. You can also stop most garnishments by filing for bankruptcy.
What is the most they can garnish from your paycheck? ›
Limitations on the Amount of Earnings that may be Garnished (General)
| Weekly | Biweekly | Monthly |
|---|
| $290.00 or more: MAXIMUM 25% | $580.00 or more: MAXIMUM 25% | $1,256.66 or more: MAXIMUM 25% |
2 more rowsMany creditors are reluctant to settle debts once they have a garnishment. However, an attorney can help you negotiate the best settlement by offering a lump sum amount or payment terms. A third way to stop a wage garnishment includes becoming current with your debt obligations.
Can debt collectors follow you to another country? ›
Being in another country will certainly make it harder for a debt collection agency to contact you about your debt, but it's unlikely to fully deter them. The debt collection agency will be hired under a contract for a set period, to send demand letters and call you to pay off your debt.
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.
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.
How do you respond to a garnishment letter? ›
You can reply to show the court clarifying facts, documents, or other evidence to support your Claim of Exemption. Your reply must be filed at least five court days before the hearing. You can use a Declaration (form MC-30) to write your reply.
How to write a debt forgiveness letter? ›
I am therefore asking you to consider writing off my debt as I can see no way of ever repaying it. If you are unable to agree to this, please explain your reasons. Thank you for your help and I look forward to hearing from you.
Can you be garnished twice for the same debt? ›
It is not legal for your wages to be garnished twice by two different employers for the same debt. This is known as double-dipping and it is not allowed by law. The court and/or IRS should provide you with an itemization of the alleged debt so that you can determine if it is accurate and why you owe it.
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.
Can a garnishment drain your bank account? ›
Can a debt collector access my bank account? Yes, a debt collector can take money that you owe them directly from your bank account, but they have to win a lawsuit first. This is known as garnishing. The debt collector would warn you before they begin a lawsuit.
What kind of bank accounts can be garnished? ›
If a creditor or debt collector has sued you and a court has ruled against you, the plaintiff may be able to garnish your wages or bank account — both a savings or checking account.
