A bank levy is a real and serious threat if you owe money to a creditor or the IRS. It takes time to enforce a bank levy because the creditor must follow proper protocol such as receiving a court-issued default judgment in a lawsuit. You have an opportunity to defend yourself, but if you lose your appeal and the creditor wins the lawsuit, it can employ a bank levy right away.
The first step in the process for obtaining a levy is filing a lawsuit in the local civil court. The time that it takes to do this varies depending on the creditor. For example, if it is a credit card debt, the creditor usually makes several attempts at collections, which could last several months, before seeking a court remedy. The creditor must prove to the court that you owe and defaulted on the debt. The court grants the debt collector a default judgment if it successfully wins its case. You have an opportunity to appeal. To do this, you must respond to a summons to appear in court.
A levy is a court order that grants another party the right to remove funds from your bank account to satisfy a debt. There is no time limit for enforcement of a levy. The time that it takes depends on when the creditor files the necessary paperwork with the local authorities to levy funds from your account. In New York City, a creditor or debt collector can hire a city marshal to enforce the levy.
The Exempt Income Protection Act (EPIA), which went into effect on Jan. 1, 2009, protects bank accounts that contain subsistence funds. The EPIA protects you if you receive Social Security, disability, worker's comp, SSI, veteran’s benefits, unemployment benefits, public assistance, Railroad Retirement benefits and Black Lung benefits. However, a bank levy is enforceable if you owe child support payments and federal taxes.
If you receive a summons to appear in court for debt you owe, do not ignore it, or the debt collector will automatically win its case against you. Having legal representation is important even if you receive assistance from a public attorney. You still have an opportunity to negotiate with your creditor before the matter goes to trial. This saves you money in the long run as creditors usually tack on their lawyer's fees and other expenses to the money owed. If you hire your own attorney, it becomes even more expensive if you lose your case.