Time is short when you get a notice that a creditor has levied your bank account.
California has protections that may allow you to recover money that’s been seized.
But success in getting your money back depends on prompt action and following the procedures.
Bank levy basics
A creditor with a judgment is entitled to levy your bank account to collect the money you owe.
You have an offsetting right to keep some money by claiming exemptions.
A levy only catches the money that is in your account when the levy is served. It doesn’t affect money deposited to the account later.
Your bank has few choices when a levy is served. By law, it must hold the money in the account on the day the levy is served for the creditor.
And it must deliver to you a notice of the levy and information about your rights to claim exemptions.
What you can keep
Let’s assume that the money in the levied bank account consists of your wages.
California exemption law protects a minimum of 75% of take home pay. A non-support creditor simply can’t reach the 75% that is exempt. Cal. Code of Civil Procedure 704.070.
If your wages were already garnished before they were paid to you, what you take home is exempt from further levy.
And, you may be able to protect more than 75% of your wages if you show that you need more than 75% to provide for yourself and your family.
Two new-in-2020 exemptions protect cash in the bank, whatever its source. CCP 704.220 shelters a month’s worth of living expenses pursuant to a state index. CCP 704.225 is broader, protecting cash necessary for the support of the debtor and his/her dependents.
California law grants absolute protection to the assets of and distributions from private retirement plans and retirement-focused profit sharing plans. CCP 704.115.
Public retirement benefits are also exempt. CCP 704.110.
Federal law protects Social Security.
Claiming funds exempt
Here’s what you need to do to contest the levy.
When a bank account is levied, CCP 700.010 requires the levying officer to serve on the judgment debtor these documents:
- the writ of execution (issued by the court)
- a notice of the levy
- a list of exemptions prepared by the Judicial Council
The last item, the list of exemptions, is your key to regaining some part of the bank balance if they are traceable to wages.
The notice of levy contains the critical instructions and the time line:
To claim an exemption, you complete the Claim of Exemption form and give it to the levying officer, typically the sheriff. If you contend that the levied money is necessary for your support and for the support of your dependents, you also complete the Financial Statement.
The judgment creditor then has a choice. It can agree that the levied funds are exempt and they are returned to you. Or, the judgment creditor can set a hearing before a judge to challenge your claim of exemption.
Serve papers on time
The burden is on you as the judgment debtor to complete your clams of exemption and get them back to the levying officer on time.
A successful claim of exemption protects your funds from this levy. While it may give the creditor some visibility into your finance, it doesn’t solve the bigger problem created by the judgment.
Consider consulting with a credit counseling agency or a bankruptcy lawyer to assess the bigger picture of your finances. Even if the creditor has a judgment, the debt may still be dischargeable in bankruptcy.
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