"Help!, the Sheriff Just Levied My Bank Account!"

May 18, 2012

iStock_000005871379XSmall.jpgThe inspiration for this post comes from a call I received today. The distressed caller stated that a "bottom feeder" creditor "stole" my money from my bank account. After a few minutes of talking to this prospective client, it became clear to me that she knew nothing about her legal rights. She also reminded me that knowledge is power--because, had she had a little knowledge about her legal rights, she could have reversed and stopped the sheriff's bank levy.

Before I continue, let's discuss the basic of a sheriff's bank levy.

Bank Levies

What is a bank levy? Before this question can be answered, let's first rewind the clock a bit to determine how a creditor can levy an individual's bank accounts.

The usual scenario is as follows: a debtor may or may not owe money to a creditor; therefore, before a creditor or his legal counsel can attempt to collect on a debt, the creditor must first make good-faith attempt to collect on the debt.

The usual course of action is to first send the alleged debtor written notices. The notices can initially take the form of a friendly "reminder" by the original creditor. (Anyone you owe money to is a creditor.) Should there be no response from the debtor; the next course of action is for the creditor to take more aggressive action. This usually includes the creditor hiring an aggressive collection agency or selling the debt to a debt buyer. It is at this stage in the process where the creditor's agent starts pelting the alleged debtor with harassing calls and/or letters (also known as "dunning" letters). Once the debt is sold to a debt buyer or assigned to a third party, the goal of the third party is to take whatever steps are necessary to get the alleged debt paid. It is an alleged debt because at this point, there is no proof that the debtor owes the amounts claimed. This could happen for a number of reasons, e.g. the creditor has the wrong person (e.g. this could happen with common names, such as John Smith), the wrong amount, or simple mistake, for instance, the alleged debt was previously paid--but not correctly noted to the file.

If the alleged debt is not paid after numerous attempts to contact the debtor for payment, the creditor then proceeds to the next step--filing a lawsuit in a court of law. The normal course and required course of action is after filing the lawsuit, the creditor's legal counsel takes steps to personally serve a copy of the Summons and Complaint (and all other documents provided by the Court Clerk at the time of the court filing) on the alleged debtor. If the alleged debtor does not timely respond to the lawsuit, then the creditor has the right to ask the judge to enter the alleged defendant-debtor's "default." This means that the court is legally authorized to "enter the default" and thereafter the judge confirms and approves the amount requested. The form used to confirm the amount owed is called a "judgment" and the creditor is now known as a "judgment creditor."

For many consumers reading this material, they know very well that the road leading up to the judge entering the default is heavily corrupted by the creditor and his associates in order to circumvent and break the law, in order to stomp over the debtor's legal rights--both outside and inside a court of law. Finally, once the creditor has a valid judgment, the judgment creditor is then free to collect payment on the amount stated on the Judgment. In the majority of cases, there are three primary ways a judgment creditor can collect on the judgment:

1. Garnish wages

2. Put a lien on the judgment-debtor's real-estate

3. Bank Levy

Types of Creditor Judgments:

Judgment for Child Support

Judgment for Spousal Support

Creditor's Judgment

If the judgment relates to consumer debt (e.g. credit cards), then the debtor has a better chance of challenging the sheriff's levy. If the judgment is for child and/or spousal support, the chances are much less because such orders area considered "priority" debts.

So back to the original question: What is a bank levy? It is a process where a creditor, after obtaining his Judgment, obtains a "writ of execution" from the court. The writ authorizes the creditor to then go after the personal property of the debtor to pay the debt owed. The creditor delivers the writ of execution to the sheriff with instructions that he seize "levy" the personal property. In most cases, the creditor wants liquid funds if the original debt owed is to a bank for amounts owed on credit-cards. In these cases, the creditor instructs the sheriff or marshal to withdraw the funds from the judgment-debtor's account and transfer it over to the creditor for payment towards the debt.

It is important to note that if a judgment-debtor timely submits a Claim of Exemption form to the sheriff, there is a good chance that the funds will be returned to the debtor.
While the creditor can also levy other personal assets, they will not be discussed here as the most common form of levy is the bank levy.

Need Help?

At the Law Office of Linda C. Garrett, an online virtual law office, providing full-scope and limited-scope legal services in the practice areas of consumer law, mortgage law, bankruptcy law and family law, Ms. Garrett is available to provide an initial free 30-minute consultation. Ms. Garrett is also available to provide, depending on the need, a 1 to 2 hour consultation. Ms. Garrett is also available to provide coaching services. For example, during a paid consultation or coaching session, Ms. Garrett is able to explain the following:

The legal significance of the legal paperwork;

Provide an overview of the bank-levy process;

Identify and explain important court dates and deadlines;

Explain the pros and cons of challenging a bank levy;

Help the judgment-debtor understand their various legal options--to include the pros and cons in connection with filing bankruptcy, debt settlement and submitting a Claim of Exemption form; and, finally;

Evaluating the judgment-debtor's risk in connection with a bank levy and wage garnishment.

If you wish to set up a consultation, contact the Law Office of Linda C. Garrett. Also, if you are someone you know is having family-law issues, visit Ms. Garrett's California Family Law & Divorce blog and sign up to receive news postings of future blog posts.