How far can creditors go with a bank levy?
Dear Debt Adviser,
This morning, I found out my checking account has been drained of its entire balance. Customer service told me that there was a bank levy placed on that account, and all funds had been withdrawn. So here's my question: I'm the primary holder of that account. I'm also included in my parents' checking account. If collectors continue to retrieve funds from my primary account where I'm alone, can -- and will -- they access my parents' account for the remaining balance? I'd really appreciate a prompt response.
-- J. Leon
The creditor you owe was awarded a judgment from the courts for a debt that you'd ignored for a very long time. The creditor then executed the judgment with the court in the form of a bank levy order. When a bank receives an order to levy someone's account, the bank is required to freeze the funds in the account. But, before any funds can actually be taken from the account, the bank must send a notice of levy to the account holder. Included in the notice is the information and forms to file a claim of exemption with instructions on where to file the exemption. You should have received a notice of levy from your bank before the money was withdrawn. It could be that you received a piece of mail from your bank and didn't notice it or ignored it. This is a great example of why it is important to open, read and act on all mail from courts, creditors and banks.
If the funds that were removed from your account were not enough to satisfy the debt judgment against you, the creditor must go back to the court and request another order to levy your account. Because your parents' bank account includes you as a signer on the account, the collector could attempt to levy that account as well. Should that happen, the account would be frozen as soon as the bank receives the order from the court. However, your parents could file the claim of exemption (this must typically be done in 10 days or so) and document that the funds in the account belong to them, and that could stop the levy by the creditor. The levy order applies only to the person named in the judgment.
No one wants their parents involved in their debt problems. Should your parents' account be levied, the funds in their account would eventually be released. But it could take weeks for them to regain access to their money to pay their bills, and that's long enough to potentially damage their finances and your relationship with them. A better idea would be to have your name removed from their account, at least until you have satisfied the amount still owed on the judgment against you.
Moving forward, I suggest that you contact the collectors and work out a repayment arrangement for the remaining balance rather than wait for them to take action.
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