Judgment Recovery And The Use Of A Bank Levy To Collect Judgments

If you are an individual creditor that has been awarded a judgment against a debtor, you have probably reached the point where you understand that the courts leave the collection of money entirely up to you with little help from the legal system. Although the civil court system does provide tools that can be utilized with full authority of the court. One such tool is a bank account levy.

What Is A Bank Levy

If and when you as the judgment creditor locate the bank accounts of the judgment debtor, you can file for what is called a bank levy and have the balances in the accounts frozen and turned over to you to satisfy the judgment you have been awarded. Bank levies are most often used by the Internal Revenue Service to compel payment of back taxes, but is also a tool that can be used by individual judgment creditors. A bank levy is used after numerous attempts have been made by the creditor to collect money owed. If the debtor continues to refuse payment of the money owed, the creditor will very often take the debtor to court and have a judgment placed against the debtor for the balance owed on the debt.

After the judgment is awarded and the debtor continues to refuse payment for settlement of the debt, a bank levy can be used to seize any and all back accounts and the balance on hand will be frozen for a period of time, usually 21 to 30 days, and then turned over to the creditor. However, the judgment debtor can contest the bank levy during this period and file for a extension in some cases where certain funds are exempt. Money that is deposited in the account that are VA benefits, welfare payments, social security benefits or child support payments are exempt and cannot be seized.

How Long Is A Bank Levy In Force

Many times when people think of a bank levy and a bank account being frozen, they mistakenly believe that the debtors bank accounts are frozen until the judgment is paid in full and satisfied. However, this is not how a bank levy works. When a judgment creditor has the proper paperwork sent to the debtor’s bank, the bank levy is only good for the balance on hand the day the debtor’s bank receives the bank levy. Once the bank receives the bank levy, the balance on hand is frozen and set aside for a 21 to 30 day period depending on local laws, and held by the bank until this time has expired and then sent to the creditor.

After the bank levy has been processed and the balance on hand is frozen and set aside, the debtor can make deposits without worry the new deposit will be added to the money that has been frozen. The bank levy issued is only good for the amount on hand when the bank receives the levy from the judgment creditor. The debtor’s bank account is not actually frozen with all future deposits automatically going to the creditor. Bank levies are a “one time shot” for only the balance on hand. Although the creditor can issue bank levies as many times as they wish, they do not freeze the bank accounts of the debtor indefinitely which is mistakenly believed.

Although bank levies are an effective tool for judgment recovery purposes, they should however be used only after all other attempts to collect the money have been ignored or refused. Very often after a debtor’s bank accounts have been levied, they will close the account and open a new one at another bank which forces the creditor to find new accounts. In some cases the debtor will start using bank accounts of friends and family to avoid the collection process completely which makes the process even more difficult for the creditor.