photo credit: Peter Hellberg
Almost worse than being one of the “unbanked” is being on the receiving end of a Bank Account Levy. A Bank Account Levy (aka a frozen bank account) can cause unimaginable havoc in the lives of already struggling New Yorkers.
Just picture it. You just got paid and are out grocery shopping. You fill up your cart with enough food for your family to eat for a week and proceed to check out. Comfortable in the knowledge that your paycheck is sitting happily inside your bank account, you pull out your debit card and swipe.
Imagine your surprise when that little card-swiping box displays the words:
INSUFFICIENT FUNDS
The cashier rolls his eyes and informs you that your card did not go through. Even as you start to panic you swipe the card again – assuming that you must have just typed in the wrong pin number. But once again the words come screaming at you:
INSUFFICIENT FUNDS
By this point, you may be feeling a bit flushed as you realize that is the only card you have. You might have $20 in your wallet – but since you just ran up $150 worth of food – that $20 won’t go very far.
Completely embarrassed, you mumble something to the cashier as you rush out of the store, leaving the groceries on the conveyor belt. When you call the bank the next day to find out what is going on, the teller informs you that your bank account is frozen.
Welcome to the World of the Bank Account Levy
When a levy (e.g. a fee, tax or a fine) is placed on your bank account, you can no longer access whatever money was in that account. The account is effectively frozen in place because a creditor has placed a block on it.
For people living in Brooklyn and other parts of New York City, if your account is frozen, then you can bet that there is a court judgment against you or someone with whom you share that bank account.
But No One Told Me!
My clients frequently complain that neither the bank nor the creditor told them that they were going to place a levy on the account in question. And sadly, no one has to tell you that the account is going to be frozen.
However, Creditors (who we’ll learn more about when we get to letter “c”) do need to tell you that they’ve filed a law suit against you and if they obtain a judgment against you, they have to let you know that too.
The good news is, some income is protected from being frozen and just because your account is frozen, does not mean you can’t “unfreeze” it and get access to your money again.
Protected Income
Under the Exempt Income Protection Act (EIPA) – something we’ll learn more about when we get to letter “e” – certain bank accounts (with certain amounts of money) are protected from Bank Account Levies. If you receive funds that are considered “subsistence funds” (e.g. government benefits, pensions, etc.), then EIPA may prevent creditors or debt collectors from freezing the accounts in order to pay debts like credit card bills.
If you have protected income, then the creditor must release the funds to you immediately.
But What If My Account is Already Frozen?
If you are currently dealing with a frozen account, then you will need to get rid of the judgment that allowed the Bank Account Levy. This is called “vacating” (or erasing) the judgment – something we’ll touch more on when we get to letter “v.”
In order to vacate the judgment you will need to file an “order to show cause” (and you guessed it – that will be one of our letter “o” terms) and have the judgment erased. After the judgment has been vacated, the creditor or debt collector will have to decide whether or not to try to sue you again for the debt.
Bank Account Levies are no joke and they can cause a lot of short term frustration. But if you are dealing with a frozen account, try not to panic. It may take a period of time but you can typically get your money back in short order.
Other attorneys playing the Bankruptcy Alphabet Game:
- B Is For Business Bankruptcy Options
- B Is For Beware
- David Axinn says that B Is For The B Word (not THAT one)
Print
email
PDF
Twitter
Google Buzz
Facebook
Digg
del.icio.us
Liked This Post? Then You Should Check Out These Too!:
