Besides hounding you with annoying collection calls, your creditors can sue you if you fail to pay your debts. If the creditor wins a judgment in court, it can take additional steps to garnish your wages or levy your bank account. While you can file an exemption claim to protect your assets, there's no guarantee it will be approved. If an exemption claim is denied, it may be difficult to prevent a bank account garnishment.
Claiming an Exemption
Once the judgment is entered against you, you have a certain amount of time to file an exemption claim. The time frame varies from state to state, but it's generally no more than 30 days. According to the Federal Trade Commission, you can claim an exemption for certain protected deposits, including Social Security benefits, veterans' benefits, federal student aid, military annuities and survivors' benefits and Supplemental Security Income benefits. State laws typically protect other benefits, including unemployment, child support and worker's compensation. Exempt funds in your bank account may still be subject to seizure in cases involving certain types of debt, including past due taxes, child support and alimony.
Denial of Exemption
During the time period allowed for filing an exemption claim, your bank is required to freeze the funds in your bank account up to the amount of the judgment. Once the court has reviewed your claim, the bank must be notified of the judge's decision. If your claim is denied, you have the right to file an appeal with a higher court. If you don't file an appeal or your appeal is denied, the bank is legally required to release the amount that's being held to the court. The court will then pay the money to your creditor to satisfy the judgment.
Vacating the Judgment
If you don't have any income or assets that you can exempt, you can attempt to have the judgment vacated to stop a bank account levy. This essentially erases the judgment and removes any levies pending against you. You must be able to show grounds for getting the judgment reversed. For example, the court may remove the judgment if you can prove that you were never properly served notice of the original court date. Even if the judgment is vacated and the levy reversed, your creditor can still file a new lawsuit to collect the debt.
If you've been sued by a creditor, consider your options for paying the debt to avoid a bank account levy. For example, you can contact the creditor directly to attempt negotiation of a settlement. You can also file a motion with the court to pay the judgment in installments. If a bank account levy is imminent and you don't have any other way to pay, you can file bankruptcy as a last resort. When you file a bankruptcy petition, the court will enforce an automatic stay, which prevents your creditors from taking any further collection actions against you.
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