Garnishing Bank Accounts: Can Law Firms Access Your Money?

A law firm can garnish your bank account, but only after suing you and winning a court judgment. This means they have to file a lawsuit, serve you with legal papers, and then win the case or get a default judgment. Once they have a court judgment, they can request a garnishment order, which allows them to take money directly from your bank account. This process is known as a bank account levy or a freezing of your bank account. While you will usually be notified of the lawsuit, you may not receive a warning before the garnishment happens. However, there are ways to prevent and stop bank account garnishment, such as opening an exempt bank account or filing a claim of exemption.

What is garnishment?

Garnishment is a legal process that allows a creditor to get paid without the debtor's permission or cooperation. It involves the creditor taking money directly from the debtor's bank account or withholding a portion of their earnings to settle an unpaid debt. This can be done through a court order or, in the case of the Internal Revenue Service (IRS), without one.

Garnishments are typically a last resort for creditors to collect debts, and they can harm the debtor's credit rating. While creditors must notify the debtor of the lawsuit that leads to the garnishment, they are not required to provide a warning before the garnishment takes place. Once a garnishment order is issued, the debtor's bank will freeze funds in their account up to the amount owed, and the creditor will receive these funds directly.

Wage garnishment is a common form of garnishment, where an employer withholds a portion of an employee's earnings to pay off a debt. This can include debts such as child support, student loans, tax levies, and unpaid taxes. Federal law prohibits employers from firing an employee due to wage garnishment for a single debt, and Title III of the Consumer Credit Protection Act (CCPA) sets limits on the amount that can be garnished from wages.

To prevent bank account garnishment, individuals can open exempt bank accounts, such as those in specific jurisdictions or those holding exempt income, which are protected from garnishment under state or federal law.

Can a law firm garnish your bank account without permission?

Garnishment is a legal process where a creditor takes money directly from a debtor's bank account to collect on an unpaid judgment. This allows the creditor to recover funds if the money in the account is not legally exempt. While the process varies by state, there are typically four main steps:

• Obtaining a Court Judgment: The creditor must first sue the debtor and win a court judgment for the debt.
• Filing a Garnishment Request: The creditor files a garnishment request with the court.
• Serving the Bank: The court issues a garnishment order, which is served on the debtor's bank.
• Freezing Funds: The bank freezes the account funds to satisfy the debt up to the judgment amount.

Some creditors can garnish bank accounts without the debtor's permission, such as the IRS, while others must receive court approval. It's important to note that certain types of funds are exempt from garnishment, including federal benefits like Social Security and Supplemental Security Income (SSI). Additionally, state exemption laws may protect a portion of wages, personal property, or money in the account from garnishment.

To prevent garnishment, it is crucial to stay on top of debt payments. If that's not possible, seeking help from a credit counselor or a bankruptcy attorney to create a debt payment plan is advisable. Responding promptly to any legal action taken by a creditor is also essential, as ignoring a lawsuit can lead to a judgment against the debtor, making it easier for the creditor to freeze and garnish their bank account.

How can you prevent a bank account garnishment?

A bank account garnishment is a legal process where a creditor takes money directly from a debtor’s bank account to collect on an unpaid judgment. This allows the creditor to recover funds if the money in the account is not legally exempt. While creditors must notify you of the lawsuit that leads to the garnishment, they are not required to warn you before the garnishment happens. Once the bank receives the garnishment order, your funds are immediately frozen.

To prevent a bank account garnishment, you can:

• File a claim of exemption or object to the garnishment in court.
• Open an exempt bank account. An exempt bank account is a bank account protected from garnishment under state or federal law. For example, in the United States, tenancy by entireties accounts are joint accounts held by married couples that are exempt from garnishment.
• Open an offshore bank account. An offshore bank account is simply any bank account based in any jurisdiction other than your own. This can help to heavily delay interdictions against your stored funds or prevent the creditor from accessing your funds.
• Set up a privacy banking trust (PBT). A PBT legally separates the individual from their financial assets, offering enhanced security against garnishments.
• Settle your debt. Because wage garnishment is expensive and time-consuming, the creditor may accept partial payment.

What to do if your bank account is garnished?

If your bank account has been garnished, you will receive a notice of garnishment. This will explain the court procedures for claiming exemptions from garnishment and getting your money released. You must notify the court, the bank, and the person or business garnishing your account in writing, and you can seek help from a lawyer.

You can file a claim of exemption or object to the garnishment in court. You may be able to get the garnishment removed if you can pay off the debt, but this can be difficult. You can also request that the court reconsider the garnishment and ask for it to be changed to an amount that you can pay.

You can also protect your funds in advance by opening an exempt bank account. This could be a bank account in a state that prohibits garnishments, an offshore bank account, or a wage or government benefits account. You can also use a business bank account to avoid garnishment of your personal money.

If you file for Chapter 7 or Chapter 13 bankruptcy, collection efforts, including garnishment of your bank account, will generally stop.

What is the process of bank account garnishment?

Bank account garnishment is a legal process that allows a creditor to take money directly from a debtor's bank account to recover funds from an unpaid judgment. While the specific rules vary by jurisdiction, the general process involves four main steps:

Obtaining a Court Judgment

Firstly, the creditor must sue the debtor and win a court judgment for the debt. This involves filing a lawsuit against the debtor for the debt and obtaining a judgment in their favour.

Filing a Garnishment Request

Once the creditor has obtained a judgment, they can then file a garnishment request with the court. This is typically done by serving the bank with a "Garnishment Summons" or "Garnishment Order". The creditor may also need to file a motion to freeze the bank account.

Serving the Bank

The court then issues a garnishment order, which is served on the debtor's bank. The bank is required to comply with the order and freeze the specified amount of funds in the debtor's account. The bank must also notify the debtor of the garnishment and provide them with information about their rights and how to respond.

Freezing Funds

The bank freezes the account funds up to the judgment amount, which prevents the debtor from accessing or withdrawing those funds. The frozen funds are then transferred to the creditor to satisfy the debt. It is important to note that there may be limits on the amount of money that can be garnished, and certain types of income or funds may be exempt from garnishment, such as Social Security benefits or government assistance.

It is possible to stop or challenge a bank account garnishment by filing a claim of exemption or objecting to the garnishment in court. This typically involves completing and returning the necessary paperwork, such as an "Exemption Form", and providing supporting documentation. If the creditor objects to the exemption claim, the debtor has the right to a court hearing to present their case.

Frequently asked questions