Yes, it might be legal for your creditor to levy your bank account.
There are certain situations when a creditor is allowed to remove funds that are in your bank account – known as a bank levy. The creditor may only take up to the amount that you owe and any money seized is applied to the balance owed.
A creditor has the right to levy you bank account when:
- The creditor has a judgment from the court.
- The creditor is a tax collector. The IRS has the right to levy your bank account without filing a suit for unpaid taxes.
- The creditor is your bank and has the right of offset under state law.
Creditor with a Judgment
Before most creditors can levy your bank account, or garnish your wages or put a lien on your property, they must first sue you for the unpaid debt (breach of contract). Only after they win the law suit and have a judgment from the court do they have the right to take powerful collection action against you.
Further, before a judgment creditor can levy your bank account, under Georgia law it must first serve you with a copy of summons of garnishment. A bank levy or other garnishment may only occur ten days after you are given written notice of the pending garnishment. O.C.G.A. § 18-4-64.
Unlike the majority of unsecured creditors, the IRS has collection powers without needing a judgment from the court.
However, you still have the right to due process. You will be notified before money is seized from your bank account. The tax code requires that the IRS give you notice of your tax debt and notice of their intent to levy.
Creditor is Your Bank
Pursuant to state law and/or the deposit agreement between you and your bank, the bank may have the right to “offset” your account – meaning the bank can seize funds from your account to satisfy an unpaid debt owed to the bank.
For example, your bank may offset (take money from) your checking account to pay for a missed car payment where the bank also holds the car note.
In Georgia, “a bank with which a deposit account is maintained may exercise any right of recoupment or set-off against a secured party that holds a security interest in the deposit account.” GA Code § 11-9-340 (2014).
It is not necessary for the bank to furnish you notice of its intent to levy, because due process is satisfied by the bank’s right to offset without warning.
Bankruptcy Stops Collection Actions
As soon as you file for bankruptcy protection, all collection action against you must stop including bank levies. If you are deep in debt, possibly facing a situation where your account may be levied, it is time to explore if bankruptcy is the right solution to get you out of debt.
Learn about the ways bankruptcy can help you. Contact us for a free consultation by clicking here or calling (912) 351-9000. We’re here to help you gain the financial freedom you deserve. The Law Offices of Barbara B. Braziel proudly serves the greater Savannah, GA area.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.