What Is a Levy on a Bank Account?

When you have an outstanding debt, and your creditor has tried every other method to collect it, that organization can have a levy placed on your bank account and seize the balance in satisfaction of the debt you owe them. Not only do creditors use this method of collection, but the IRS uses it to collect taxes that are unpaid. As soon as it has been notified of the lien that has been placed on your account, the bank will notify you that it has been placed, will identify the type of account and the amount that has been attached and will provide information about where you can make contact to resolve the situation.

Any Account Fair Game

A levy exercised by a creditor can extend to any deposit account that you may have with a bank. That means that not only will your checking account be attached; so can the savings and trust accounts that are in your name. And the lien will cover any funds up to the amount that you owe. Furthermore, most creditor can apply a lien on your accounts even if they are located in foreign banks.

Length Of Time

There are two kinds of liens that can be applied. One will remain in effect until the entire debt is paid and the other has a specific termination date. If there is less money in your account than you owe, there are some liens that remain valid in perpetuity and will extend to funds that you may deposit in the future. However, many issued by the federal government terminate at a set time, usually in about two weeks after the date the lien went into effect.

Not a One Time Event

If a lien on a bank account does not satisfy the amount that you owe, a creditor has the right to establish another lien on your account in the future. This can become quite expensive because some banks will charge $100 or more each time a lien is placed on your account. Furthermore, any checks that you may have written prior to the lien being established that have not cleared the bank will be bounced, and will incur additional bank charges.

Notification

A creditor normally views liens on bank accounts as a last resort. Besides the notification that you have already received, the creditor will most likely garnish your wages before attaching a bank account.

Exceptions

The lien of a bank account does not apply to funds received from several sources. For example, if you receive Social Security or Veteran Administration benefits, those funds will not be included in the lien. Therefore, if you receive them, contact the creditor with that information to have the lien reduced by the amounts you have received from those sources.