Chances are that if your bank account was levied, you were already aware that you owe an unpaid debt and, most likely, were served in the recent months with a judgment entered on a lawsuit. In Minnesota, many—but not all*—bank levies are typically the result of collection on a judgment for unpaid debts owed to the judgment creditor.
*Some creditors such as the taxing authorities, small business administration loans and other government-funded debts are permitted under law to levy bank accounts and garnish wages without having to first obtain judgment in a court of law.
The typical scenario leading up to a bank levy is that a defaulted unsecured debt such as a credit card or medical bill falls into collection and eventually ends up with a local law firm that commences a lawsuit by serving you with a summons and complaint. If that summons and complaint goes unanswered by the debtor, the creditor will typically obtain a judgment within a month or two for the amount owed plus any allowed attorney fees, interest and other costs. This judgment is then docketed in the county you reside and the creditor’s attorney soon thereafter commences collection efforts including wage garnishment and bank levies. You may also be served with post-judgment discovery asking you where you work, bank and for other details of your income that will aid the creditor in collection on the judgment.
Unlike a wage garnishment where prior notice is required, a bank levy can happen at any time without notice as soon as the judgment has been entered. If you are like most people, you probably have a bank account at any of the major Minnesota banks (US Bank, Wells Fargo, TCF, etc.) and/or you previously disclosed where you keep bank accounts when you originally applied for the credit card. All a judgment creditor’s attorney needs to do to levy your bank account is to serve a subpoena on each bank that they think you may own an account and your account is then levied for all money up to the amount that you owe on the judgment. A bank account levy is a serious financial set-back for most families, as it unexpectedly impairs your ability to pay your rent or mortgage due the next month. On some occasions, the levied funds may be returned without the need to file for bankruptcy but only if you can prove to the judgment creditor’s attorney that the money levied came from exempt sources such as social security or other need-based assistance.
For more information on lawsuits and judgment collection, see You’ve Just Been Served with a Lawsuit, Now What? and Collection on the Judgment – What to Know if You Are Facing a Wage Garnishment.
A bank levy is a common precursor to filing for bankruptcy relief. Either chapter 7 bankruptcy or chapter 13 bankruptcy will have the immediate effect of stopping all bank levies and wage garnishments. Additionally—and very importantly from a timing perspective—you may be able to get the levied funds returned to you if you act quickly. The general rule is that levied and garnished funds must be returned to you after you file bankruptcy if the following two criteria are met: 1) the total amount levied is at least $600 or more AND 2) you file bankruptcy within 90 days of the date that the levy subpoena was served on the bank, which is usually a day or two prior to the actual date the funds were levied from your account.
Contact attorney Lynn Wartchow to discuss your bank levy and what you can do to have the levied money returned to you.