Many people wonder how they can do a bank levy on their debtor in order to collect the money owed on their court judgment. After all, bank levies are a great way to get the court judgment paid all at once. It doesn’t matter if your judgment is from the Small Claims Court or regular Civil Court. There are a few factors to consider, but first, let’s define what a bank levy is.
So, what is a bank levy? A bank levy is a legal move that creditors can take to satisfy a judgment. Basically, legal documents are served on the subject’s bank and the money/assets are frozen. After a certain amount of time, giving the debtor time to file a claim of exemption, the bank then forwards that money to the creditor.
First, Find Where the Debtor Banks
Do you know where the debtor banks? In some cases, you may have an old check from the debtor. Or perhaps he was a former friend or business partner, and you know where he or she banks. But, of course, he may have closed his account to avoid you. You can’t be sure. There are several legal ways to find a person’s bank account. Check out this post on bank locates and read about some legal methods to find where your debtor banks.
Remember that you do not need an account number to perform a bank levy. As long as you have the full social security number of the subject – you’re good to go. Where do you get the full social security number? That’s for another discussion, but there are ways. Hopefully, you have either the SSN or the account number.
If you are unsure of the legalities involved in locating someone’s bank account, please read the Gramm-Leach-Bliley Act (GLBA) of 1999. There are certain things that you are not allowed by law to do when trying to ascertain where someone banks. Mostly, it involves “pre-texting.” In this case, lying to bank officials or posing as the debtor (or anyone else for that matter), is a big no-no. Read up on the GLBA and make sure you’re complying with the law. Or, better yet, consult with a qualified attorney.
Keep in mind that most people bank at one of the 4 or 5 major banks in an area. When all else fails, why not levy on all of the banks at the same time? In most states (not California) it doesn’t matter which branch you levy upon. Any levy on any branch is good for all accounts held by that bank at any location in the state. As of this writing, the top 5 banks in the United States are:
- JPMorgan Chase & Company
- Wells Fargo
- Bank of America
- US Bancorp/US Bank
You may also have a major local bank or credit union in your area that has many branches. You could add that to the above list. The point here is that you could save the cost of finding someone’s bank by taking an educated guest and hitting all of them with what we call a blind levy.
A blind levy can be very effective. The word “blind” simply means that you are not sure which bank the debtor keeps his funds, and you are simply “guessing.” The process is fairly simple: Get your paperwork together, make 5 or 6 copies, and then send your process server to each of the major banks. Most process servers will discount the total cost as these are very simple serves and, most likely, all of the banks will be in the same general area.
How Much Does a Bank Levy Cost?
So, how much will a bank levy cost me? The cost of levying on a bank is minimal in most states. You need a Writ of Execution (sometimes called a Writ of Garnishment). The cost is anywhere from about $20.00 in California to over a hundred dollars in Florida. Then you can ask the sheriff to serve the bank for you.
The writ of execution is the instrument the sheriff uses to levy on the bank for you. The writ tells the sheriff how much your money judgment was for, what costs you’ve had so far enforcing the judgment, and how much interest is due on the judgment. This “writ” is stamped, signed by the court, and mailed back to you.
Most states have a website where you can get their writ online in a PDF file. Or you can find one for a small price at Legal Zoom. When you have the writ, simply type in the information and the amounts. You’ll need to compute interest too, based on your states interest rate per year. Use a simple interest calculator like this one to help you calculate this.
In most states, when you fill out the Writ of Execution (remember, it’s sometimes called a Writ of Garnishment) you’ll also have to complete an accompanying form usually called a “Memorandum of Costs.” This “memo of costs” is where you justify the interest as well as the reason for the additional court costs you may have had, such as a judgment debtor examination, process service, and so on.
This may seem complex, but if you take it a step at a time it’s quite doable. Fill out the forms. Call your court to get the exact cost for submitting the writ. The court may well have a free legal advisor who can give you specific details about what goes where on the writ. Do it. Then, just mail it in, or take it to the court (with a check to cover the fee).
Your next step is to call the sheriff to see what the cost is for serving the bank or banks. In some counties sheriffs are too busy to perform bank levies, so you’ll have to use a Registered Process Server. They cost a little more but they are worth it because you can levy the bank on the exact day you want. Expect to pay around $100.00 to the process server.
When to Levy
When should you levy on the bank? In a lot of cases, you won’t know exactly when your debtor will have the most money in the account. But, in some cases, you might have a good idea – particularly if you are aware that the debtor gets a direct deposit. If you know there is a direct deposit, it’s best to levy around the 2nd or the 16th of the month. Also, if your debtor is a renter, then factor in when you think the landlord will cash the debtor’s rent check. You want to levy before the rent check goes through.
If the debtor owns a home and pays a mortgage, the mortgage will probably be due by the 15th of the month. Sometimes it’s best to levy around the 5th of the month. That’s probably when the most money is in the account. And don’t worry if the debtor banks at the same bank that holds his mortgage. The bank still has to honor your levy. It’s the law.
Just do it. If you are going to levy the bank on a particular day of the month, then use a registered process server. They can do it on the exact day and time that you request. A sheriff will do it when he or she gets around to it. You can find a registered process server online at NAPPS. The National Association of Professional Process Servers.
Make sure that the process server you speak with performs bank levies! Some of them just serve simple papers. A bank levy is a bit more complex for them than a simple serve, and many will shy away from this type of serve.
After the bank is levied upon, be patient. The bank will freeze the account and all monies in it up to the amount of the writ. They will then hold the funds for approximately 15 – 30 days and then turn it over to the sheriff. The sheriff will hold it for a while, and then send it to you. This might take up to 30 days. Be patient, as you will eventually get your money and satisfy that judgment.
Sit back and wait some more. Nothing happens quickly when you are dealing with the government. So, continue to be patient. The sheriff will notify you by mail how much money was levied upon. Then check will be arriving in about 30-45 days. Due to budget cuts in local counties, it might take even longer. Call the sheriff for the specific length of time.
What Can Go Wrong?
The debtor is given the option to file a “Claim of Exemption,” saying that the money in the account is exempt for this reason or that. This happens in about 15% of the cases. Don’t worry about it until it happens.
If it does happen to you, call the court to see what your options are. Tell them you want to file an opposition to the claim of exemption, and set a hearing. Then the debtor will have to appear and explain why the money is exempt. Usually, they have no good reason at all, and the court will rule in your favor. It’s an additional step and a bit of a hassle, but worth it to follow through. Some of the reasons why the debtor might file a claim of exemption are listed below. These are not written in stone and may be contested. Consult with a competent attorney.
- Disability Funds
- Social Security and Supplemental Security Income (SSI)
- Veterans Benefits
- FEMA Aid
- Child Support
- Student Loans
- Bank overdraft fees and debts to depositing bank
If your debtor files the claim of exemption because of one of the reasons above – you may run into trouble. However, it has been my experience that they are usually a last-ditch effort on the [part of the debtor to keep his money. Go with the flow, and dispute the claim if needed.
What if there is no money in the account? Well, that happens. There may be “no account found,” or insufficient funds, or simply a zero balance. If so, wait for another day. Or, you may have to decide to go in a different direction and try a wage garnishment.
Bank levies are a great way to satisfy your judgment. Just make certain that you follow the laws and have all of your ducks in order. This process may seem to be a bit drastic, but usually, debtor’s have had plenty of notice to satisfy the judgment – or at least set up a payment plan.
State laws vary – so beware. Do your homework in advance so that you have the best chance of satisfying the debt. Consult with an attorney, if needed, and be prepared to shell out a few hundred dollars to complete the task.
What is a wage garnishment? A wage garnishment is when legal documents have been served on your employer to start withholding a certain amount of your paycheck (usually 25% each month), in order to satisfy a court-ordered judgment. The garnishment will stay in place until the debt is paid off.
Can the IRS perform a bank levy? Yes, they can. They can also garnish your wages, slap a lien on your property, and seize other assets that you own. Always try and settle with the IRS. Actually, they’re pretty good about setting you up with a payment plan.