How to protect money from creditors in bank accounts

Written by melvin richardson
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How to protect money from creditors in bank accounts
Knowing all the facts may help protect your bank account from creditors. (final judgment image by Keith Frith from

Creditors can go after the money in your bank account in certain situations. If a creditor takes you to court and wins a judgment against you it can do a bank levy, which is the same as a bank garnishment. They freeze your account for the amount of the judgment and any money recovered goes toward the payment of your past due debt. There are ways that you can protect the money in your bank account from creditors.

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  1. 1

    Make arrangements to pay. When a creditor wins a judgment against you, it's not too late to stop a bank levy. Call the creditor--or attorney for the creditor or collection agency--and make payment arrangements. Don't agree to payment arrangements that you cannot afford to keep. Make sure the payment is comfortable and can be made every month without a problem.

  2. 2

    Find out if the money in your account is exempt from a bank garnishment. Some sources of income that are exempt (protected) from a bank levy. Income received from unemployment compensation, welfare, Social Security, workman's compensation, disability income, pension, Veterans Administration benefits and child support, is exempt from a bank levy.

  3. 3

    Go to court and fill out an exemption form. If a creditor levies your bank account, when your income is from an exempt source, you will have to go the court where the judgment was rendered and ask the clerk for an exemption form. Fill it out and have a copy made, by the clerk, for your self. You need to indicate on this form why you are exempt. You may have to attend a hearing. You will be required to prove that your sources of income are exempt. When it comes to an Internal Revenue Service (IRS) bank levy these same sources of fund are not exempt from a bank levy.

  4. 4

    Negotiate with the IRS. The IRS can also get a bank levy because of past due taxes. When the IRS levies your bank account, you will have 21 days to take action. Call the IRS and make payment arrangements. It may be willing to accept reasonable payment arrangements. Once arrangements are made be sure that you pay every month. If you can pay the entire amount of money that you owe, the IRS will discontinue the bank levy.

  5. 5

    Provide proof that you are experiencing a hardship. If the IRS does a levy on your bank account, contact them in writing and let the agency know you are experiencing a financial hardship. When you cannot afford to pay your basic living expenses this is considered a hardship. You may be able to get the bank levy stopped. The IRS may do an extensive investigation of your financial situation.

  6. 6

    Find out if the statute of limitations has run out. Some creditors will attempt to collect on old debts even after the statute of limitations has run out. The time frame can vary from state to state. If you receive a summons to court, make sure you go. Once you are in court you need to provide proof that the statute of limitations has run out and you will win the case that prevents a judgment or bank levy. By missing the court date, the court awards a default judgment to the creditor and they can do a bank levy, even though the statute of limitations has run out.

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