Stop Your Bank Levy By Filing Bankruptcy
Bankruptcy can stop a bank levy and eliminate the underlying debt. After your bankruptcy petition is filed Federal Law will protect your wages and bank account from creditors. To learn more about filing an emergency bankruptcy petition call our bankruptcy attorney at (916) 596-1018.
Bank Levy
A levy upon financial accounts is often the result of losing a lawsuit or tax debt. When you owe the IRS, California State Franchise Tax Board, or a judgment creditor you can lose the balance of your bank account through a bank levy. In essence, a bank levy is a collection process in which your bank account funds are frozen and transferred to your creditor. The IRS and California Franchise Tax Board often use bank levies to collect on tax debt, but judgment creditors also resort to bank levies to collect on unsecured debt that can be discharged in chapter 7 bankruptcy. The popularity of bank levies is due to the fact that bank levies are not a one time event; they can be repeated until the balance of the debt has been paid off. This repeated depletion of your bank account will disrupt your finances and drive you deeper into debt. As a result, many people in Sacramento stop their bank levy by filing chapter 7 bankruptcy.
How Bankruptcy Can Stop Your Bank Levy
The filing of a bankruptcy petition gives rise to the “automatic stay” which acts as an automatic injunction against certain collection activities, which effectively stays these activities and the levy of your bank account. In practical terms, once your bankruptcy petition has been filed the creditor is prohibited from engaging in a bank levy. To put the creditor on notice of the automatic stay and protect your bank account, your bankruptcy attorney should contact opposing counsel and the Sheriff once your bankruptcy petition is filed.
How An IRS Bank Levy Works
A levy is served on a bank with whom you have a bank account that you have the unrestricted right to withdraw funds from, even a joint bank account. For instance, the IRS can levy on a bank account under your name and the name of another party as long as you have the unrestricted right to withdraw funds from the account. Upon receiving the levy from the IRS the bank will freeze the balance of your account and hold the funds for 21 calendar days before delivering the balance to the IRS. For more information on IRS Bank Levies read Internal Revenue Manual – 5.11.4 Bank Levies.