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January 26, 2022 Collections

Understanding How Debtors Argue Against Bank Levies in New Jersey

Understanding How Debtors Argue Against Bank Levies in New Jersey

Creditors, lenders, and other financial institutions can use bank levies as a powerful tool to collect on an outstanding judgment. The Balance succinctly defines a bank levy as a process that “freezes funds” within an account. When funds are frozen, a creditor can then act to collect on a debt. Getting a bank levy put in place can be complicated. A bank seeking to levy funds must do the following: 

  • Obtain a legally valid judgement from a New Jersey court;
  • Find a petition to the court to levy a debtor’s bank account; and;
  • File a Motion to Turn Over Funds to execute the levy.


Businesses and consumers may even raise arguments to try to get out of an otherwise valid bank levy. Banks and financial institutions need to be prepared for the different types of defenses that debtors can deploy. In this article, our
New Jersey bank levy attorneys highlight some of the most common ways consumers and businesses try to get out of bank levies. 

Three Ways Debtors Attempt to Get Out of Bank Levies in New Jersey 

Through a bank levy, a creditor can essentially confiscate assets held within a financial account to satisfy a legally valid judgment. However, consumers and businesses can (and often will) raise a defense in response to an attempted bank levy. In New Jersey, a defense against a bank levy typically must be asserted within ten days of the date that a creditor attempts to seize the funds. Here are three of the most common strategies that consumers and businesses use to try to argue out of bank levies in New Jersey: 

  • Federal or State Exemptions: Exemptions are the most common defense against bank levies. Account holders can claim several types of exemptions against a bank levy under federal law and New Jersey state law. Under federal law, certain benefits—including Social Security income and veterans’ benefits—cannot be levied. Under New Jersey law, the initial $1,000 in a bank account is generally also exempt from a levy. 
  • Filing for Bankruptcy: A debtor may defend against the execution of a bank levy by filing for bankruptcy protection. When a bankruptcy petition is filed, the petitioner gets the benefits of the automatic stay. As explained by the United States Bankruptcy Court for the District of New Jersey, an automatic stay “stops lawsuits, foreclosure, garnishments and all collection activity against the debtor.” A bank levy may be put on pause and collection of the judgment will be handled by the bankruptcy process. 
  • A Jointly Owned Bank Account: Under New Jersey law (N.J. Ann. Stat. §17:161-4), the portion of a jointly owned bank account contributed by an “innocent person” may be defended against a levy. To raise this defense against a bank levy, a debtor has the responsibility of proving that certain funds rightfully belong to the other account holder(s). Some individuals and businesses may try to improperly defend a bank levy by misusing the joint account holder defense. 


How a New Jersey Debt Collection Lawyer Can Help

Every commercial collection case is unique. Lenders and financial institutions have the right to levy a bank account to satisfy an unpaid judgment—but doing so in practice can present some challenges. At Snellings Law LLC, we have the skills, legal knowledge, and persistence that you need. Among other things, our New Jersey debt collection lawyers are prepared to: 

  • Answer questions and explain your collection rights under New Jersey law;
  • Identify all potential bank accounts that may be subject to a bank levy; 
  • Look into other areas of income/assets held by the debtor business or consumer; 
  • Compile a comprehensive assessment of the assets, liabilities, and collection potential; 
  • Petition to the court to obtain a bank levy; 
  • File a Motion to Turn Over Funds (executing on a bank levy); 
  • Prepare a response to an exemption claims filed by the debtor with the court; and
  • Take whatever legal action is required to protect your rights as a creditor. 


Contact Our New Jersey Bank Levy Attorneys Today 

At Snellings Law LLC, our New Jersey debt collection lawyers have extensive experience helping clients navigate bank levies. If you have questions about the strategies that debtors use to try to argue out of bank levies, we can help. Contact our law firm now for a confidential consultation. From our office in Parsippany, our collection attorneys represent banks and institutions throughout New Jersey, including in Newark, Morristown, Edison, Elizabeth, Jersey City, Princeton, and Trenton.