What Is a Bank Garnishment and How Does It Work?
Navigate the complexities of bank garnishment. Learn what this legal action entails, how it impacts your finances, and your options.
A bank garnishment is a legal procedure where a creditor seizes funds directly from a debtor’s bank account to satisfy an unpaid debt. This action bypasses direct payment from the debtor by targeting assets held by a third party, the bank. Understanding this process is important for anyone managing personal finances.
Understanding Bank Garnishment
Bank garnishment, also known as a bank levy, involves a court order that permits a creditor to access funds within a debtor’s bank account. This differs from other collection methods because it targets money held by the bank, which acts as a third party. When a bank receives a garnishment order, it freezes the specified amount of funds in the account, making them inaccessible to the account holder.
The bank’s role is to comply with the court order, ensuring the funds are secured for the creditor. This can affect various types of bank accounts, including checking and savings accounts.
The Path to Garnishment
The process leading to a bank garnishment begins when a debt remains unpaid, prompting the creditor to pursue legal action. A creditor must file a lawsuit against the debtor and obtain a court judgment. This judgment is a formal court decision confirming that the debtor owes a specific amount of money.
Once a judgment is secured, the creditor can request a “writ of garnishment” or a similar court order from the court. This writ is a legal command instructing a third party, like a bank, to seize the debtor’s property or funds. The writ is formally served on the bank, initiating the garnishment process.
Exempt Funds
Not all money within a bank account is eligible for garnishment; certain funds are protected by federal or state law. Common categories of exempt funds include Social Security benefits, Supplemental Security Income (SSI), disability benefits, and veterans’ benefits.
Other protected funds include federal student aid, railroad retirement benefits, and certain pension funds. Unemployment compensation, workers’ compensation, and child support payments are also exempt from seizure. While these funds are protected, an individual may need to formally claim the exemption to prevent their seizure.
What to Expect During Garnishment
When a bank receives a writ of garnishment, it will freeze the debtor’s account or a portion of the funds up to the amount specified.
The bank is required to notify the account holder of the garnishment, often within a few days of receiving the order. Following the freeze, the bank holds the funds for a specific period, which can vary by jurisdiction, before transferring them to the creditor. This holding period allows the debtor an opportunity to respond if they believe the garnishment is improper or involves exempt funds.
Responding to a Garnishment
Upon receiving a bank garnishment notice, prompt action is advisable due to strict deadlines. The first step involves reviewing the notice to understand the amount claimed and the creditor initiating the action.
If protected funds are involved, an individual can file a claim of exemption with the court. Debtors may also negotiate directly with the creditor to establish a payment plan, which can sometimes lead to a release of the garnishment. Seeking legal advice from an attorney is beneficial to understand specific rights and available options for challenging or resolving the garnishment.