In the fiscal year 2024, the IRS effectively handled 5.3 million delinquent accounts that were in active collections, while at the same time, it incorporated 3.5 million new delinquent accounts into its records, and approximately $69.4 billion was retrieved from the taxpayers through enforced collection actions. Bank levies are recognized as one of the enforcement tools used within these delinquent account actions.
What does a levy on a bank account mean? A bank levy is primarily used by creditors to collect debt when the debtor does not pay their debt. Unlike wage garnishment, which seizes only a part of the paycheck, a bank levy permits the creditors to freeze and take money from a person’s bank account as soon as there is a court judgment.
The instant loss of money access could cause a great deal of trouble financially, particularly if huge amounts of money for rent, utilities, or groceries are involved.
We will explore the workings of a bank levy and ways to prevent it.
Understanding Bank Levies: An Overview
If you owe money to debt collectors, they might use a bank levy as one way to tentatively recover their funds, allowing them to take an individual’s hard-earned money directly from a bank account.
If enforcement agents freeze any amount of the bank account to administer the levy, you have only limited access to the rest of the account. This situation can be overwhelming, but you can always resort to family members, friends, charitable organizations, and others for advice.
Bank levy is a distressing issue, especially when it concerns the welfare of entrepreneurs and businessmen. Knowledge of what is a disregarded entity for tax purposes in Nevada and other states can be a step towards understanding how certain entities are treated under tax law.
Understanding a levy on your bank account can help you evaluate your game plan, rebuild your financial life, and re-establish your sense of living within an economic community.
Types of Debts That Can Result in a Bank Levy
Various kinds of debts might lead to a bank levy, so it is very important to be aware of the financial obligations that may jeopardize you. One of the major reasons is unpaid taxes. The IRS can take every cent you have left to settle your tax debt.
Another way that may lead to a levy is when a credit card creditor gets a judgment against you. Debts in default on student loans, specifically federal student loans, may lead to a levy. Unpaid child support will likely result in a bank levy.
Awareness of what those risks are and how to maintain the health and security of your financial life is very important. This realization will help you plan how to manage your debt and defend your personal assets.
The Process of Implementing a Bank Levy
Understanding the implications of a bank levy and how it works is important. A judgment must be secured first by the creditor, proving the debt. With this, the creditor can now file a bank levy request at the court.
After approval, the court sends a notice to your bank to freeze your account and to turn over the specified funds to the creditor. Your bank will inform you about the freeze, and at the same time, they will provide you with a period of time to contest it.
Having such knowledge feels liberating, as you can now be very truly informed during this important phase where huge monetary loss could happen.
Exemptions and Protections Against Bank Levies
It is of utmost importance that you are aware of the sorts of accounts and assets that are safe from the bank’s actions since not all the money in your account can be legally seized by the creditor. The government, through its federal rules and state laws, has been protecting such incomes and benefits and you can assert your right to such exemptions during a levy. The exemptions are granted for main sources of income such as Social Security, unemployment, child support, and so on, and these are the types of public assistance that usually come with exemptions.
Keep in mind that the money you receive as a disabled individual is subject to variations in allocation. Some states are cautiously provided with a few exemptions to prevent funds for key household expenses from being taken away.
Such exemptions create a barrier between creditors and a large variety of assets, allowing the individuals to concentrate on their financial soundness and tranquility of mind during the whole process of handling their debts.
Steps to Take if Your Account Is Levied
If you anticipate levies on your bank accounts, you should take numerous actions to control your financial transactions. Contact your financial institution to verify the application of the lockout and understand the limits of the amount affecting you.
These measures will allow you to take steps to bring some variation to your collateral. You may either enter a debt negotiation meeting after settling the debt amount in good faith or ask creditors if they can formulate a payment plan addressing the same.
In case your suggestions get turned down, you have the option to either lodge an objection or seek the services of a lawyer to get some legal guidance. It is advisable always to check the existing laws in your locality to find out the rights that you can claim.
Keep yourself informed and try to always be within your budget. Spending your money wisely would save you from difficulties in the future.
