How To Avoid Bank Levies

by: Jonathan Goldsmith Cohen
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When You Are At Risk of a Bank Levy

In order to be at risk for a bank levy on a consumer debt, a Judgment must be entered against you. A Judgment is entered against you after the conclusion of a lawsuit on the debt brought in Superior Court in New Jersey. Due Process does still exist, so you must be sued on the debt, receive proper notice of the suit, have time to respond, and of course, have your day in court. Remember, the bottom line is, is this your debt? Did you already pay it off? Can you afford to pay it off? If you cannot pay the debt off and it is in fact yours, a judge is not going to be sympathetic and side with you. A Judgment will be entered against you. Once a judgment is entered against you, you are exposed to the risk of bank levies that will drain your account and leave you with no available funds. Levies can occur until the debt is paid in full, you become “unbanked”, or you file from bankruptcy. Here, I will discuss how to shield yourself from bank levies.

How a Bank Levy Happens

Let’s take the example of a Capital One credit card debt. It was originally for $7,000.00. You attempt to pay it but cannot afford the payments. Eventually, a law firm representing Capital One, or representing the purchaser of the debt sues you for the balance owed including interest. The creditor will sue you in the New Jersey Superior Court in the county in which you reside. At this point, with accrued interest, the debt could easily be over $15,000.00. A Summons, stating that you are being sued will give you 35 days to respond to the suit. Once this is a public record, you will receive a flurry of letters from bankruptcy lawyers offering their services and offering to do things for free. Frankly, the majority of my clients come from referrals from other clients. Be wary of lawyers advertising via direct mail. They certainly are not offering anything for free.

There are instances where it makes sense to respond to the lawsuit. One instance is if the debt is truly not yours. Another is if the balance seems incorrect. Ultimately, if the debt is yours and you cannot afford to pay it, a Judgment is entered against you.

Court Officers and Bank Levies

Once a Judgment is entered against you in New Jersey, you will receive an Information Subpoena asking for information from you including your employer’s information and a list of your bank accounts. Regardless of whether you respond to the Information Subpoena, the creditor can still find out who your employer is and where you bank.

After the time period has ended for the Information Subpoena to be returned to the law firm representing the judgment creditor, a Writ of Execution is issued. A Writ of Execution gives a Court Officer, acting under the county sheriff’s office, the power to levy your bank accounts without notice. Note, your business bank accounts, retirement accounts, and investment accounts (think mutual fund accounts, money market accounts) cannot be levied.

How To Avoid Bank Levies

The Court Officer will submit the Writ to your bank who will then levy the account to satisfy the Judgment. If there is not enough in the account to pay the Judgment in full, then the Judgment will still have a remaining balance on it.

New Jersey State Law and Bank Levies

New Jersey State Statutory law entitles you to a return of $1,000.00 if your bank account was levied. Social Security payments are exempt from bank levies.

How To Avoid Bank Levies New Jersey

If there is a Judgment entered against you, you cannot have a bank account in your name or you run the risk of bank levies. This is unquestionably inconvenient. Research and client feedback have provided an elegant solution until you can go back to having a bank account.

Chase Liquid is a reloadable debit card. Your paycheck can be direct deposited onto it. However, it is not considered a depository account and cannot be levied. It costs a flat fee of $4.95 a month and there is no cost to use the card for purchase anywhere a Visa is accepted. You can withdraw funds from any Chase ATM without any fee. In addition, the Chase Liquid card allows you to track your banking through Chase Mobile banking. You can also pay your bills online through Chase liquid at no additional cost.

A reloadable debit card is not a permanent solution to outstanding Judgments against you. It is an effective way to manage a Judgment creditor while you figure out how to handle the Judgment. If you have Judgments against you, you will have difficulty renting an apartment or financing a vehicle. You will also be unable to get a mortgage to purchase a home.