Bank Levy
A bank levy process is a legal procedure by which a creditor empties out all of the money from your bank account in repayment of a debt, and without prior notice. Any creditor who has a judgment against you, including a credit card lender, medical service provider, HOA, or any other type of creditor, can do a bank levy. The bank levy process is very similar to the wage garnishment process in that your money is forcefully taken from you, against your will. Depending on the amount of money in your bank account at the time of a bank levy, a bank levy can actually be much worse than a wage garnishment. With a wage garnishment, 25% of your earnings are deducted each pay period and sent to your lender. With a bank levy, 100% of the money in your bank account, up to the amount of your debt, is taken out of your bank account.
How the San Diego Bank Levy Process Works
California bank levy laws simply require your creditor to file a complaint in Superior Court, obtain a judgment, and then your creditor's attorneys can obtain a bank levy order that directs the sheriff to seize the money in your bank accounts in repayment of your judgment debt. To do a bank levy in San Diego, your judgment creditor simply hands the San Diego sheriff a bank levy order and asks the sheriff to serve the bank levy order upon one or more banks at which you hold accounts. Once the sherif delivers the bank levy order, your bank account funds are frozen and your bank will take the money in your accounts and hand it to the sheriff.
When Do I Receive Notice of a Bank Levy
Unfortunately, you don't receive notice of a bank levy until after your bank account funds are frozen. Neither you nor your lawyers will receive advance notice of a bank levy in California. If you or your attorneys had advance notice, you would simply go and empty out your bank account, rendering the bank levy process a useless collection mechanism. For this reason, you only find out about a bank levy after your bank account funds are frozen.
How to Stop Bank Levy Process
An experienced bankruptcy lawyer can file a bankruptcy for you in time to stop the bank levy process. If your lawyer files your bankruptcy before the sheriff serves your bank with a levy, then the bank levy process stops and your money in your bank account will be safe and will not be subject to levy. If the sheriff has already served your bank with a levy at the time that you file bankruptcy, then the funds in your account may be turned over to the sheriff and the sheriff will typically hold the funds pending instructions by the bankruptcy trustee.
A San Diego Bank Levy Lawyer Can Obtain a Bank Levy Release
Once the bank levy order is served on your bank, your bank will hold the frozen account funds for a short period of time (usually 1-2 weeks) in order to make sure that the levy was proper and is not on the wrong person's bank account, and to give the account holders or their lawyers a chance to contest the levy if there are valid grounds for contesting the levy. For example, the levy may have been made on the wrong person's bank account, the account may have contained another person's money, or the account may contain protected social security funds. A San Diego bank levy lawyer can obtain a bank levy release and recover levied funds, by proving that the bank levy was wrongful. If there are no grounds to prove a bank levy was wrongful, you will need to file bankruptcy to release a bank levy.
How a San Diego Bankruptcy Attorney Can Recover Levied Funds
If your account has already been levied, then your bank will send the levied funds to the San Diego sheriff, who will hold them for 2-3 weeks, before giving the money to your creditor. A San Diego bank levy attorney who is also a San Diego bankruptcy attorney, may be able to recover your recently levied account funds by avoiding the bank levy lien on levied funds in the hands of the sheriff, by sending the sheriff a letter of consent, by claiming that the levied funds constitute a preference payment.
Levied Funds In the Hands of the Sheriff
In San Diego, if levied account funds are still in the hands of the sheriff when you file bankruptcy, the San Diego sheriff will turn the funds over to the bankruptcy trustee for the benefit of your estate upon a request from the trustee or order of the Court. If you claim all of the levied funds as exempt, the trustee usually will not recover the funds for you because there will be no recovery for creditors and hence no way for the trustee to be compensated. If only part of the levied funds are exempt, then the trustee will usually recover the funds for you, subject to a trustee's fee. If the trustee does not recover the levied funds for you, and the amount is covered by your bankruptcy exemptions and claimed as exempt in your bankruptcy filing, your bankruptcy lawyer can file a motion to avoid the lien (the bank levy is a lien on the levied funds) and obtain a court order avoiding the lien and ordering the sheriff to turnover the levied bank account funds to you.
Letter of Consent
In San Diego, your bankruptcy attorney may be able to obtain the levied funds in a more efficient manner by having the San Diego bankruptcy trustee sign off on a letter of consent that your attorney sends to the sheriff.
Preference Payment
If the levied funds have already been sent by the sheriff to your creditor, then the San Diego bankruptcy trustee can recover the funds, by claiming that the levied funds paid to your creditor constitute a preference payment. In that case, if the funds are within your exemptions, you will be entitled to keep the portion that is covered by your exemptions. The San Diego bankruptcy trustees will usually do this only if there are nonexempt funds that can be distributed to creditors and used to compensate the trustee.
Adversary Proceeding
If the trustee does not recover the levied funds as a preference (and waives the trustee's right to do this), then your San Diego bankruptcy lawyer can file an adversary lawsuit in bankruptcy court to have the funds returned to you. Whether the cost of an adversary lawsuit is justified, will depend on the amount of money that was taken by the bank levy and the amount that is protected by your exemptions. Your San Diego bankruptcy attorney will be able to tell you whether recently levied funds that were given to a creditor constitute an avoidable preference payment and can be recovered for you.
