When the bank receives a notice from the debt collector, the bank must immediately freeze any funds in your account that are not exempt from collection. This notice is called a bank levy. That means you can’t withdraw the money or use it to pay checks you have written. If you have already written checks on the account and are in danger of bouncing, then you will want to make other arrangements for payment on those checks.
When you receive a notice from the debt collector or from a bank that your account has been frozen, then you will have to notify the bank and the debt collector in writing if the funds in the account are exempt. In the perfect situation, you would be able to prove that all the funds in a particular bank account are exempt. However, if you have commingled exempt and non-exempt funds, then it will become much more difficult to protect your bank account. Therefore, if you know ahead of time that you will have a court judgment entered against you, then it makes perfect sense to keep the exempt funds in a separate account. Moreover, you should not commingle exempt and non-exempt funds in the same account. If you wish to protect your exempt benefits you should keep your funds in banks to which you do not owe money, and you should segregate your public assistance funds in special purpose accounts clearly designated as such.
Once your bank account is frozen, then your creditor must file a motion that requests a turnover of your seized account. This type of motion is called a turnover motion. At this hearing, you will be permitted to explain why the frozen funds shouldn’t be seized. There usually is not a lot of time to protest a bank levy, so it is best to move quickly. And the sooner you act, the sooner the exempt funds will again be available for your use.
It’s important to provide detailed documentation that the funds in the account are from entirely exempt sources. For instance, you might provide:
- Bank deposit slips
- Paystubs
- Statements from government benefit agencies
- Statements from insurance companies
- Pension or annuity statements
- Bank account statements and registers
- Any other documentation you can find that traces the funds from an exempt source into that particular bank account