How To Stop A Bank Account Levy From A Creditor
At some point, a creditor may try to place a levy on your bank account. This automatically freezes some or all of the assets in your bank account. The money in your account is generally held for approximately 21 days before being turned over to the creditor to pay your debts. This gives you time to contest the levy and find ways to deal with the creditor, including filing for bankruptcy.
Ways To Stop A Creditor From Executing A Levy On Your Bank Account
As of May 2011, a new rule states that creditors cannot take money from accounts that receive electronic deposits from exempt federal sources such as:
- Social Security benefits
- Federal pensions
- Veterans’ benefits
Banks are required by law to flag these accounts as receiving federal benefits. This is supposed to prevent creditors from taking the money you need to survive. If a creditor places a levy on your account, the exempt funds cannot be given to the creditor to pay your debts.
Our New Jersey bankruptcy attorneys can discuss your options for how to stop a bank account levy from a creditor and what you can do to remedy the situation.
Frequently Asked Questions About Bank Account Levies In New Jersey
As attorneys who regularly handle debt collection defense cases, we understand that receiving notice of a bank levy creates immediate concern and confusion. Here are common questions our clients ask.
What should I do if I receive a notice of a bank levy?
What matters first is to act quickly to protect your rights. In New Jersey, a creditor must notify you after a levy is placed on your bank account, typically when they file a Motion for Turnover of Funds. You have 10 days from receiving this notice to file an objection with the court. You can object if the funds are exempt, such as Social Security, veterans’ benefits, unemployment or support, or if the account is not yours (for example, a joint account where the debt belongs to someone else).
As such:
- Gather evidence like bank statements to prove the source of the funds.
- File your objection using forms like those in the New Jersey Bank Levy Survival Kit or available through the court.
- You can also consider filing for bankruptcy, as it triggers an automatic stay that halts the levy process.
Acting fast is critical, as funds may be released to the creditor after 21 days if no objection is filed.
Can I still access my money if my bank account is levied?
Once a bank levy is placed in New Jersey, your account is frozen, and you cannot withdraw funds until the issue is resolved. However, you can still deposit money, though those funds may also become subject to the levy. New Jersey law protects certain funds from being levied, including Social Security, veterans’ benefits, and the first $1,000 in your account.
To access exempt funds, you must file an objection within 10 days of the turnover motion notice, providing proof like bank statements showing the source of the money. If the court grants your objection, the exempt funds are released. If the levy involves a joint account, you may argue that some or all funds belong to a non-debtor co-owner. Until the court rules, the account remains frozen.
Can I negotiate with the creditor to stop a bank levy in New Jersey?
Yes, but timing matters. Before a turnover order is issued, you may contact the creditor to propose a payment or settlement to release the levy. Creditors may agree to avoid court costs, but they are not obligated to negotiate. If you reach an agreement, get it in writing to ensure the levy is lifted.
Negotiation is harder after a turnover order, as the creditor gains rights to the funds. Filing for bankruptcy can pause the levy through an automatic stay, giving you time to negotiate or reorganize debts. Contact the creditor promptly, as delays can lead to funds being released after 21 days.
Contesting A Levy On Your Bank Account
Once a creditor, such as a collection agency, has filed a notice of motion for the turnover of funds, you can file an objection. New Jersey law protects the first $1,000 in your bank account from being taken by creditors. Anything above that amount will be subject to payment to your creditors to satisfy the levy.
Many people who are in debt may not have more than $1,000 in a bank account. For those who do, the only effective way of protecting that money is to file for bankruptcy. This puts an automatic stay on the account and prevents any creditor from harassing you further. It also stops wage garnishment, foreclosure and repossession of your property.
Contact experienced personal bankruptcy lawyers with offices in Paterson, Jersey City and East Orange today to find the solutions to your financial problems. Call 973-414-8069 for a free consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.