A debt collector can request a writ of execution after winning a lawsuit and obtaining a judgment. A bank levy allows a creditor to seize funds from a debtor’s checking or savings account without advance notice.

A bank levy is a tool available to creditors after a judgment is issued. A writ of execution directs a bank to seize funds up to the full amount owed under a judgment, and banks are legally required to comply with a levy order.

Banks will freeze funds in an account upon receiving a levy order, often without advance notice. A bank levy can be applied to all accounts a debtor holds at a bank, and it can drain an account entirely up to the judgment amount.

Wage garnishment is another collection method that allows a creditor to take money directly from a borrower’s paycheck. Wage garnishment is subject to federal caps limiting how much of a paycheck can be taken.

Certain funds are legally exempt from bank levies. Federal benefits such as Social Security, Supplemental Security Income, veterans’ benefits, and federal disability payments are exempt from bank levies under federal law, and banks must automatically protect two months’ worth of federal benefit deposits received via direct deposit.

State laws may provide additional bank levy exemptions, including minimum balance protections and protections for child support payments. Most states allow a limited time after a levy to file an exemption claim for seized protected funds.

A bank levy does not resolve the underlying debt, and if funds are insufficient, debt collectors can seek additional levies. Debt collectors can pursue additional levies until the debt is paid, settled, discharged in bankruptcy, or the judgment expires.

Debtors can negotiate a settlement or payment plan to request the release of a bank levy, and settlement or payment agreements related to levies should be documented in writing before payment is made. Failing to properly serve lawsuit papers may make a judgment challengeable. Filing for bankruptcy triggers an automatic stay that halts most collection activity, including active bank levies; Chapter 7 bankruptcy can discharge qualifying unsecured debts entirely, while Chapter 13 bankruptcy allows a debtor to restructure debts through a repayment plan.

Creditors and debt collectors often take legal action to recover debts that reach the charge-off stage. Americans are currently carrying about $1.28 trillion in collective credit card debt, and the average credit card interest rate is over 21%.