A bank levy allows a creditor to seize payment from you without your consent by forcing your bank to turn over funds in your bank account to the creditor. Although opening new bank accounts can delay an eventual garnishment, doing so does not strip the creditor of the right to levy your accounts for a debt you owe.
How It Works
A creditor cannot place a levy on your bank accounts unless it has a court order instructing your bank to freeze your accounts and turn the funds over to the creditor. Creditors obtain a court order by suing you. Should the creditor win the suit, it becomes a judgment creditor and uses its judgment to apply for a court-ordered garnishment. Federal government debts are the only exception to this rule. For example, if you owe unpaid taxes to the Internal Revenue Service, it may levy your bank accounts without the need to file a lawsuit against you and secure a court order granting it permission to do so.
The age of your bank account does not affect a judgment creditor’s legal ability to place a levy against it. Some individuals open new bank accounts with different banks in the hopes that doing so will prevent a creditor from proceeding with its right to garnish. While opening new accounts does not prevent garnishment, it does slow the creditor down. In order to garnish a new bank account, the creditor must return to court and request a fresh garnishment order for the new bank -- granting the debtor a temporary reprieve.
Locating New Accounts
One of the ways a new bank account grants a debtor temporary relief from garnishment is that the creditor must locate the new bank before it can request that the court prepare a new garnishment order. Judgment creditors are often aware of a debtor’s original bank due to past payments stemming from that particular financial institution. Once the debtor changes banks, however, the creditor must track down the new bank. If a creditor knows that an individual has a new bank account yet cannot successfully locate the account, it will sometimes request that the court order the debtor to appear in court and disclose the account’s location.
Even if the judgment creditor locates a debtor’s new account and serves the bank with a garnishment order, it cannot levy funds the federal government considers exempt from garnishment. These funds include, but are not limited to, child support, Social Security, alimony and unemployment. Unless the debtor provides the bank with written proof that the account contains exemptions, however, the creditor will seize both exempt and non-exempt funds from the new account.