How Does Bank Garnishment Work?

wage garnishment

When a borrower owes a significant amount of money to a creditor or debt collector, that agency will often garnish the borrower’s bank account. It is a drastic step, and one debt collectors are often hesitant to take. There are many Florida laws they must follow when doing so, and it also comes at a significant expense to them.

When borrowers hear that their bank account is about to be garnished, otherwise called a ‘creditor’s account levy,’ they are often very concerned and have many questions. This is natural, and while having your bank account garnished does have many consequences, understanding the process can help you prepare for what’s ahead.

How the Process Starts

If you owe a significant amount of money on debts, regardless of whether they are secured or unsecured, the creditor holding the debt will contact you. After you default on the debt, they will tell you that your debt has been ‘charged off.’ This means that the creditor does not think they will successfully recover the debt. They are going to write it off as a loss and package it with other accounts that also have unrecovered debt so they can sell it to a collection agency.

The Next Steps

After the creditor sells your debt, you will be contacted again by either the creditor, a collection agency, or even a law firm. They may try to contact you by phone, mail, email, or even issue a summons. However, this doesn’t happen with all debts.

Sometimes borrowers think they can simply ignore the creditors and collection agencies and their debt will just go away. In some instances, this is exactly what occurs. If the debt is very low, the collector may allow the statute of limitations to run out on the debt. Although this means they are barred from attempting to recover the debt, this is often a more attractive option to collectors than the expense of filing a lawsuit.

On the other hand, if the debt is considered to be quite significant and the collector thinks they have a good chance of success in recovering the debt, they will likely pursue legal action. To do this they must take the matter to court and prove that the debt is valid. If they can do this, the judge may issue a judgment against you that allows the collector to either garnish your wages or your bank account.

It’s important to understand that a collector cannot garnish either your bank account or your wages without first going to court. Only the IRS is allowed to do that. It’s also important to know that your bank is not required to alert you when a collector has pursued a bank garnishment. The only exception to this is if the account is completely depleted or overdrawn as a result of the action.

Can You Appeal a Judgment?

Generally speaking, judgments issued for bank garnishment are final. There are times when you are able to appeal these judgments allowing bank garnishments, but they are limited. You can appeal a judgment if:

  • You are the main wage earner for the household and provide more than 50 percent of child support or support for another dependent, and your net earnings are lower than $750 per week.
  • You are the main wage earner for the household and provide more than 50 percent of child support or support for another dependent, your net earnings are more than $750 a week, and you have not consented in writing to a garnishment.
  • You use the account in question to receive Social Security benefits, disability income benefits, Supplemental Security Income benefits, or public assistance benefits.
  • You use the account to collect Workers’ Compensation benefits.
  • You use the account to receive reemployment assistance or unemployment benefits.
  • You use the account to receive veterans’ benefits.
  • The account is used as a retirement account or for pension funds.
  • The account contains life insurance benefits, a cash payment for a surrendered life insurance policy, or payments from annuities.
  • The account is a prepaid 529 college trust fund or a medical savings account.

If you do not qualify for an appeal, the creditor can levy your bank account to zero funds. They can also continue levying your bank account until the full amount of the debt is paid. At the same time, collectors can also garnish wages and seize other property or assets.

Unfortunately, there is no real time limit on when they must discontinue these actions. Judgments have a statute of limitations of 20 years, which means collectors can take action for that entire time. Judgment liens can also be renewed every 10 years.

How to Stop a Bank Garnishment

Clearly, a bank garnishment can ruin a person financially. Other than a successful outcome at trial or on appeal though, there is not much a person can do to stop the garnishment from going forward. The only real solution for those in real financial hardship is bankruptcy.

If you can successfully file for bankruptcy, the court will order an automatic stay, which protects your property and your money from all collection acts. These include liens, collection calls, and judgments. Once your bankruptcy is final, your debts are discharged and collectors are once again, barred from attempting to recover the debt.

Bankruptcy should never be used as a stalling tactic. Only those who need to do so should explore this option. Not only do the courts frown on people applying for bankruptcy when they don’t really need it, but bankruptcy also has its own consequences that will be felt for a long time to come.

Are You Drowning in Debt? Our Florida Debt Defense Lawyers Can Help

If you’re drowning in debt or collection action has already been taken against you, it’s important you speak to a Fort Lauderdale debt defense attorney. At Loan Lawyers, we know how to protect borrowers from the tactics of debt collectors and give them the best chance of success with their case. Don’t think you have to go through this process alone. Call us today at (954) 523-HELP (4357) for your free consultation.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money-back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.