Stop Bank Levies in Los Angeles
Get Help from the Bank Levy Attorney at Syndicate Legal
If you checked your bank account, only to find some or all of your money was missing from your account, then you may have had your account levied.
What Is A Bank Levy?
A bank levy is a powerful legal tool used by creditors to take money from you if you owe them a debt. Bank levies are a popular way for the Internal Revenue Service and other creditors to collect debts.
Your creditors do not have an automatic right to levy a bank account. A creditor must first filea lawsuit against you to collect on the debt, and then obtain a judgment before it can proceed to levy a bank account. The IRS typically sends numerous notices of the tax debt before it sends a Final Notice of Intent to Levy. A typical creditor such as a credit card however, usually won’t send you any letters prior to actually levying your account. You usually end up finding out the hard way when you see that your funds are missing.
What Happens When A Creditor Puts A Levy On Your Account?
When a creditor or the IRS provides legal notice to the bank of its right to levy your bank account, the bank freezes the funds in your account after they’re issued the proper paperwork by the creditor via the county Sheriff. Your bank may or may not inform you before freezing the account so that you could try to stop a levy. You may learn about the levy when your debit card does not work or you see the money is no longer in the account. In my experience, you will only receive notice from the bank that your account was hit with a levy after they have already taken the money.
Certain funds such as Social Security Benefits are generally protected, however often they get levied as the bank and creditor does not realize the source of those funds unless they are in a specially designated account.
Is There Any Limit To How Much They Can Take?
How much a creditor can scoop out of your account is only limited by how much you owe them. If you owe the creditor $5,000 and your bank account has only $3,000 in it, they can take the full $3,000, leaving your account empty. Conversely, if you have $10,000 in your account and owe the creditor $3,000, they are limited to only taking $3,000 of your money. Essentially, a creditor can only take as much as necessary to “satisfy” the debt you owe them. They can keep hunting down your accounts across banks until they are paid in full.
Also, very importantly, if your name is on someone else’s account, that account too, can be levied, even if the money in the account isn’t really yours. I once had a client who was put as an authorized signer on someone else’s business bank account so he could act as an administrator. One day creditor levied all of the money from the account simply because my client’s name was on the account, even though the money wasn’t his. Keep this in mind if you have outstanding creditors and your name is sitting on other people’s accounts.
How Can I Stop A Bank Levy?
You do have some options to try and stop a bank levy. Here are a few options to consider:
- Pay off the debt and satisfy the creditor’s judgment. Often this is not feasible since by the time there is a judgment, so many fees, penalties, and interest have been incurred that the amount that you initially owed has quadrupled.
- Contact the creditor to try and make a payment plan. Sometimes a creditor may work with you to make a payment plan so you can continue to use your accounts while you make monthly installment payments to the creditor.
- Prove that the funds in the account are protected. Certain money in an account may not be subject to a bank levy. Social Security payments, federal pension payments, and child support payments are usually protected from bank levies. If these funds in sitting in a regular account however, they still may be subject to levy, forcing you to file a Claim of Exemption to try and retrieve the funds.
If none of those options apply to your situations and you really do owe the debt, the best way to stop a levy may be to file either a Chapter 7 or Chapter 13 bankruptcy.
Can Chapter 7 or 13 Bankruptcy Stop A Bank Levy?
Yes! Once a bankruptcy case has been filed, the automatic stay will prohibit the continuation of any bank levy and the money that is in your accounts should be protected.
What Is An Automatic Stay?
If you’re struggling to repay a substantial amount of debt, then you’ve likely considered bankruptcy. While it can be an intimidating topic, the truth is that bankruptcy exists to help struggling individuals get back on their feet. Chapter 7 bankruptcy has different aspects built in that ease the burden of debt and give you a second chance at financial freedom. The first way that bankruptcy offers relief is through the automatic stay.
The automatic stay means that for the duration of your bankruptcy filing, none of your creditors are allowed to pursue their debts. This includes creditors, collection agencies, and government entities. No more phone calls, letters, or emails and definitely no more wage garnishment (except for domestic support obligations). They can’t take any actions against you due to your debt. As soon as you submit your bankruptcy petition, the court will send a notice to each of your creditors and inform them that you filed, and about the limits imposed on them by the stay.
Relief from Creditors and Debts
Almost all forms of wage garnishment are halted by an automatic stay. Even if you have multiple creditors enforcing wage garnishment on your paychecks, they can usually be stopped by filing for Chapter 7 bankruptcy and then erased if you receive a discharge. Filing for bankruptcy will not only temporarily solve your wage garnishment problems, but potentially eradicate them altogether. In a Chapter 13 bankruptcy, you may pay a small portion, or all of the outlying debt back to the creditor, however it will be administered through the Chapter 13 Plan and spread out across many months. At least in this scenario, you’ll have more control of how the creditor is paid back without worrying about having your accounts wiped out.
Exceptions to the Automatic Stay
It’s important to note, however, that not all forms of wage garnishment can be halted through an automatic stay. Sometimes this depends on the type of debt, other times it depends on how many times you’ve filed bankruptcy in the recent past.
Domestic Support Obligations
These garnishments are protected by law, and therefore cannot be removed for any reason other than a change in your domestic circumstances. So if this kind of wage garnishment is the only reason you have for seeking bankruptcy, you should look at other solutions first.
Multiple Bankruptcy Filings
If you filed for bankruptcy within the past year and had your case dismissed, then your automatic stay will only be in effect for 30 days. You can ask the court to extend this timeframe, so long as you can prove that the first filing was in good faith (meaning that you truly believed you would be approved for bankruptcy, and were not simply filing to hold off creditors).
Along the same lines, if you filed for bankruptcy twice within the past year and go to file for the third time, you will not be granted an automatic stay. The reason these rules exist is to prevent individuals from abusing the automatic stay. Without these rules, debtors could file for bankruptcy an indefinite amount of times to avoid repaying their debts. You can still ask the court to instate an automatic stay on your third filing, once again by proving that the previous two filings were made in good faith.
What About After Your Bankruptcy Is Over?
While an automatic stay provides great relief from the pressure of wage garnishment, it’s not a permanent hold against your creditors. Once your bankruptcy filing is complete, you lose the protection of the automatic stay. However, your discharge will protect you from creditor actions for most, if not all of your debts. If your wages were getting garnished for a credit card bill, deficiency balance after a repossession, or medical debt and not for a nondischargeable debt, the garnishment cannot start up again after your case is closed.
If you’re encountering financial distress as a result of wage garnishments, filing for Chapter 7 bankruptcy might be the best way to resolve the issue. Not only will it halt your garnishments for a short period of time, but it has the likely potential to eliminate those debts altogether.
Take the First Step: Call us today for your free consultation to see if you qualify for Chapter 7 or 13. There is no charge for the call and we’re happy to provide options.
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