Collection actions against commercial and consumer debtors can involve bank levies. A bank levy is a tool that allows a creditor to place a hold or a “freeze” on a debtor’s bank account. The debtor will not be able to take any money out of the account until the creditor is repaid. Our banking lawyers can help with bank levies.
What is a bank levy?
A bank levy permits a creditor to freeze a debtor’s bank account to receive payment of a money judgment. When the account is frozen, a debtor can still deposit money, which could become subject to the levy, but cannot withdraw money. Generally, the creditor only freezes the amount owed; however, a New Jersey banking law lawyer has seen an entire account frozen because the debt exceeded the amount in the bank account.
How do I get bank levies?
Freezing a debtor’s bank account is extremely invasive and thus cannot be done without permission from the court. You must:
- Obtain a monetary judgment order from the court;
- Petition the court to place a levy on the bank account;
- File a Notice of Motion to Turn Over Funds.
- The debtor has 10 days to challenge the bank levy and assert any exceptions or exemptions. A hearing will occur to determine whether any or all of the frozen money should be released to the creditor.
Process of placing a bank levy on a debtor
Once you have obtained enough information and judgment from the debtor to proceed with the levy, you can begin the process of executing the judgment. In many cases, this is where everything bottlenecks.
A bank levy attorney will identify various income streams in the debtor’s name and various assets in the debtor’s name, including bank accounts. Bank accounts, however, are complicated to attach levies on. Ideally, a creditor would have debtor’s bank account information including their bank’s name and address.
If the debtor is a business, it’s generally easier to execute a levy because those funds are unlikely to be muddied with another individual’s funds (as in the case of a joint bank account between spouses). An attorney can help you identify bank accounts, but some of the money in those bank accounts may not be transferable for the purpose of repaying the debt.
Writ of Execution & Notice of Execution
Once this research has been conducted, a creditor’s rights attorney will prepare a Writ of Execution. The Writ of Execution is designed to identify what assets or income the constable will be seizing to repay the debt. The Notice of Execution is fixed to the Writ of Execution and both are delivered to the judgment-debtor by the constable or sheriff. The document simply informs the debtor of their rights.
The debtor will respond to the Writ of Execution by filing exemption claims with the court. The court will decide what money in the account is exemptible and what isn’t. To get to this point, you’ve spent money. So to find out after the fact that the money in the bank account is judgment-proof is a major setback. A creditor’s rights attorney will thoroughly research the debtor saving you the time and cost associated with pursuing unrecoverable debts.
What could hinder garnishment?
Jointly owned accounts
Generally, the law recognizes equal shares to money in a jointly owned bank account. Thus, a bank levy may only freeze half the funds if the co-owner is not the debtor. New Jersey further protects the non-debtor co-owner from having his or her contributions levied if that person could prove his or her net contributions to the account (e.g. pay stubs). N.J. Ann. Stat. §17:161-4. For example, if the non-debtor co-owner was the only one who contributed to the account and/or the debtor’s name was added to the account for convenience, then the entire account may be released to the non-debtor.
Certain benefits or money could also be exempt from a bank levy.
Federal law exempts the following benefits from being levied:
- Social Security and Supplemental Security Income (SSI)
- Federal, civil service, and railroad retirement benefits
- Veterans’ benefits
- Student loan disbursements and aid, and
- Federal Emergency Management Agency (FEMA) aid
New Jersey law also exempts:
- First $1,000 in your account
- State aid for dependent children
- Disability, workers’ compensation and retirement benefits (generally)
- Sickness insurance policies
If there are more than two months’ worth of deposits, then you can still seize the account and garnish money in excess of the two months’ deposits.
Debtor Has No Assets and Minimal Income
A “judgment-proof” debtor is one who has minimal assets and lives on social security or other government benefits. As the old saying goes, you can’t draw blood from a stone. However, you don’t want to waste your time gaining a judgment against a debtor from whom a debt would be uncollectible. A bank levy attorney will conduct due diligence on the debtor to ensure you aren’t wasting valuable time.
Debtor Files for Bankruptcy
If the debtor files for bankruptcy during this process, the execution of the levy will be stopped in its tracks. However, a creditor’s rights attorney, having researched the debtor, may be able to predict whether or not the debtor will qualify for a Chapter 7 bankruptcy in which the debts will be discharged. This can save you valuable time and money from pursuing debts that are unlikely to be collectible.
How a bank levy attorney can help
Essentially, your creditor’s rights attorney will coordinate efforts to collect the debt. This means initially researching the debtor to ensure that the debt is collectible. We will compile a list of assets, their current employer, and income listed on tax returns.
In some cases, a creditor may not know the debtor’s bank account or the debtor may have multiple bank accounts from which to draw the levy. In these cases, a creditor’s rights attorney can target banks near the debtor’s place of work or residence. We will also look into other areas of income the debtor may have. These include the following:
- Rental income,
- Personal injury settlements,
- Repayments on loans,
- Revenue from investments,
- And more.
Identification of personal assets such as cars, furniture, and luxury items can be useful for the purpose of liquidation. But first, we must determine the debtor’s ownership interest in these goods.
Contact an experienced New Jersey banking levy attorney for assistance
Placing a levy on a bank has many and possibly complicated steps. Our knowledgeable and experienced New Jersey banking law lawyers with Snellings Law LLC will:
- Seek to obtain a money judgment
- Investigate the debtor’s bank accounts and other assets
- Petition the court to obtain bank levies
- File a Notice of Motion to Turn Over Funds
- Defend and argue your right to garnishing the debtor’s bank account.
Have a question? Get in touch with us. We would be glad to hear from you.
By submitting this form, you understand and agree that we have not agreed to represent you in any matter and that no attorney-client relationship has been formed.