BANKRUPTCY STOPS WAGE GARNISHMENTS AND BANK LEVIES
Can a creditor garnish my wages or seize bank account
assets? Will filing bankruptcy stop garnishments and bank levies?
This article is based on California law and federal
GARNISHMENT AND BANK LEVIES BEFORE BANKRUPTCY IS FILED
A creditor (a person, business or bank to whom you owe
money) generally cannot automatically garnish wages (take your earnings from
your employer) or, in most cases, cannot take money from your bank account (for
example, through a bank levy) in order to collect the debt. Normally, a
creditor must first obtain a court judgment against you before being permitted
to take such drastic measures.
However, there are exceptions to the above general
rules. Therefore, you ought to promptly seek legal counsel to determine
what, if any exceptions, might apply to your situation.
Steps That a Creditor Must Take to Garnish Your Wages or
Levy Your Bank Account:
First, the creditor must, in many cases, file a lawsuit
against you in a court of law.
After the lawsuit is filed, the creditor must next, in
most cases, personally serve you with the lawsuit papers (called a Summons and
Then (assuming that you do not dispute the validity and
amount debt), the creditor generally must wait 30 days after you have been
served with the lawsuit papers. If, during that time, if you do not file
an Answer or other formal response with the court, then, after 30 days, the
creditor may request that the court enter a “default” against you. A
default means that you can no longer, in most cases, defend against or contest
After entry of a default, the creditor will normally seek
to “prove up” their case against you with the court. The creditor must
prove that you owe the debt to them, and how much money you owe them. If
the court is satisfied with the proof submitted, the court will enter a money
judgment against you.
Thus, a creditor, such as for example, a credit card
creditor, generally must first obtain a judgment against you in a court of law
before wages can be garnished or bank accounts levied (seized).
Wage garnishment law in California generally permits up
to a maximum of 25% of your income to be garnished per pay period.
To start a garnishment, the creditor must determine your
place of employment. Further, creditor must obtain a document called a
“Writ of Execution” from the court. Then the creditor must prepare a
legal document called an “Application for Earnings Withholding Order.”
Next, the creditor must retain a levying officer to serve the order on the
employer. The employer is required to notify you about the withholding
order at least 10 days before the garnishment begins.
Bank Account Levy
To start a bank account levy, the creditor must determine
your place of banking or savings. The creditor must obtain a “Writ of
Execution” from the court. Then the creditor must prepare a “Notice of
Levy.” Next, the creditor must retain a levying officer to serve the
documents on the bank. The debtor (you) is required to also receive a
copy of such documents. You will normally have at least 10 or 15 days
from the mailing of the Notice of Levy before the bank accounts are actually
There are, however, defenses and exemptions that can be
asserted that, in some cases, reduce or eliminate wages from being garnished or
bank accounts from being levied.
FILING BANKRUPTCY GENERALLY STOPS WAGE GARNISHMENTS AND BANK LEVIES.
Filing bankruptcy documents in the bankruptcy court
before the garnishment and levy funds are seized can avoid the permanent loss
The moment that you file a bankruptcy petition with the
bankruptcy court, the bankruptcy court issues an order called an “automatic
stay.” This order requires creditors and debt collectors to end all
collection efforts against the debtor and his/her/their property. In most
cases, the automatic stay remains in effect until the bankruptcy case is
closed. By that time, in most cases, the debtor will have received a
discharge of debts along with a permanent court order (called a “bankruptcy
injunction”) that requires the creditors to forever cease attempting to collect
the debt against you.
Pre-Bankruptcy Mitigation regarding a Nondisputed Debt
If you have been sued by a creditor, then, until your
bankruptcy petition is filed, you are generally advised to keep all bank
account deposits and balances as low as possible in case they are attempted to
be seized (or better yet, to the extent possible, keep your money out of
deposit accounts altogether).
Promptly Seek Legal Counsel
Lastly, if you are reading this article, and are
contemplating filing for bankruptcy protection, it is far more preferable and
cost effective to seek bankruptcy counsel and protection sooner rather than
waiting until you are on the verge of a wage garnishment or bank levy, which
may require emergency measures and additional fees and costs to rectify the
matter in whole or part.
For a free and confidential consultation contact southern California bankruptcy attorney Matthew
the new bankruptcy laws, Mr. Tozer is a debt relief agency because he
people file for bankruptcy relief under the Bankruptcy Code.
Return to Bankruptcy FAQ
to Christian Bankruptcy Attorney