What Is A Bank Levy & How Does It Work?

What Is A Bank Levy & How Does It Work?

Has The Government Placed A Levy On Your Bank Account? Here’s What You Need To Know

Paying bills is never fun, especially when they’re large bills that could drain your accounts and leave you strapped for cash.

While you may be able to go a little while without paying some of your bills, eventually the non-payment is going to catch up with you. If you owe money to the federal government or certain other entities, that consequence could come in the form of a bank levy.

Bank levies can be scary and confusing, especially if you’ve never experienced one before.

In this article, we’ll cover the basics of what a bank levy is, who can enforce one, how to avoid bank levies, and what you should do if you find you’ve had a bank levy enforced against you.

What Is A Bank Levy?

If you fail to pay a debt you owe, even after repeated attempts on the creditor to collect on that debt, the courts can allow the creditor to freeze one of your financial accounts, usually a checking or savings account, and use any money in that account to pay back your debt.

A bank levy is a legal action with which your bank must comply, so asking the bank directly not to take your money isn’t effective.

In many cases, your bank will notify you if they’re ordered to issue a levy on your accounts, though that isn’t guaranteed to happen.

If there was a lawsuit in court that allowed the creditor to use a bank levy to collect your debt, you are legally required to receive notice of this legal action.

These bank levies may take only a portion of the money in your account, or they could drain it completely and still not fully satisfy your debt. Whether you have any money left depends on how much you owe and how much money you have in your account at the time a levy is issued.

If the levy drains your account and that money doesn’t completely satisfy your debt, the levy allows your creditor to take any future money deposited into that account until your debt is paid in full.

How Does A Bank Levy Work?

Bank levies, like all other debt collection methods, begin with unpaid debts.

If you do not pay your debts owed to entities that can request bank levies, such as the IRS or the other parent of your child, they can file a lawsuit in court requesting a bank levy.

Creditor Or IRS Files A Request

The creditor must prove that you owe the money they say you owe, and that previous attempts to collect this debt have been unsuccessful. If the creditor can show all this to the court, they may be granted the right to a bank levy.

Writ Of Execution

Once a levy has been granted, the creditor needs proof of this permission in the form of a writ of execution.

A writ of execution is a legal document ordering the sheriff or other entity to collect on your debt in the method listed in the writ.

This writ, in most states, must then be properly served to you by the sheriff’s department or a process server.

You Are Notified

If the debt you owe is to the IRS, the Department of Education, or some other government agencies, they can skip the court portion of the process and skip straight to notifying you of the levy.

Your Bank Is Notified

Once you have been notified, the creditor must track down the location of your bank accounts. This process can be complicated, as some states require that a levy be applied to the bank where your account was originally opened.

After the creditor has found the correct bank and correct account, they notify the bank that your account is subject to a levy. The bank must then freeze all activity on your account - meaning you cannot withdraw money or write checks, and that any automatic payments you make from that account will fail - and turn over the amount requested by the creditor.

Levy Is Placed On Your Account(s)

Depending on how much money you have in your account and how much you owe, your bank account could be cleaned out entirely or you could be left with a reduced balance.

If the debt you owe is greater than the amount of money in your account, the creditor can request future bank levies to claim money that is later deposited in your account. A separate bank levy must be granted for every time the creditor takes money from your account.

Who Uses Bank Levies?

Many people or businesses to whom you owe money can request a bank levy, but there are a few common agencies and situations where bank levies are more common. These include:

  • The Internal Revenue Service, for unpaid tax debt
  • The Department of Education, for unpaid student loan debt
  • Anyone to whom you owe back child or spousal support

There are some situations where a creditor does not have the right to request a levy on your bank accounts to settle a debt.

For example, your credit card company cannot acquire a bank levy for your unpaid balance unless the credit card was directly issued by your bank.

In the case of the IRS or the Department of Education, they do not have to directly sue you in court in order to get a bank levy issued. Instead, they can levy your account without the intervention of the courts, but you will still be notified of the levy.

Why Might A Creditor Use A Bank Levy?

In many situations, bank levies are faster and more effective for creditors than other collection methods, such as wage garnishment.

A bank levy allows the creditor to take all available funds in your bank account - with some exceptions - to satisfy the debt. This means your debt gets paid off more quickly than repeatedly sending collection agencies after you or garnishing your wages a little at a time.

Securing a bank levy against a debtor also is less time-consuming and frustrating for creditors than other methods. Rather than collecting a debt over time from your wages, which may change, they get their money in larger lump sums.

Can Creditors Take All My Money?

In short, no. There are some cases where the money in your account may be protected from a collection in a bank levy.

If you receive federal funds, such as Social Security payments, the creditor cannot take these unless your debt is for something like unpaid taxes. Your bank is supposed to work with the creditor to review your account for any obvious deposits from federal sources and protect those funds, but that isn’t always an easy task if you have multiple deposits into that account.

Additionally, once you touch those federal deposits in any way, even just to transfer them between accounts, they’re no longer protected from collection.

Child support and alimony payments received also can be protected from a collection in a levy, as well as some pension funds and some funds received from worker’s compensation claims.

If the bank levy would seriously impede your ability to pay your daily bills, such as your rent or utilities, you can request that a portion of the money in your account be protected from collection to allow you to pay these bills.

However, you must act quickly after you learn your account is subject to a levy to protect this money because it’s much more difficult to get back once the creditor has it than it is to prevent it from being withdrawn in the first place.

Is A Bank Levy The Same As A Wage Garnishment?

No, bank levies and wage garnishments are two completely different things.

While both a bank levy and a wage garnishment are useful ways for creditors to collect debts, they differ in several key ways, including:

  • Not everyone can request a bank levy. This method is mostly reserved for federal agencies and people to whom you owe back child or spousal support.
  • Bank levies are taken from money you currently have, while wage garnishments come from money you will earn in the future.
  • Bank levies are often a faster way to satisfy a debt, especially a large one.
  • A bank levy can completely clear out your bank account, while protections for the debtor are built into wage garnishments. Wage garnishments can take no more than 25% of your net paycheck each time, leaving you with money to pay for daily necessities.

Steps To Take To Avoid A Bank Levy

While you can fight a bank levy, the best way to protect your money is to avoid a situation where your creditor may pursue one.

Here are a few ways you can avoid a bank levy before one even begins:

Pay Your Debts

This sounds simple, but it’s something too many people don’t do. For whatever reason, whether it be they forget, they don’t think they should have to pay, or they just don’t have the money, they leave a debt lingering for too long.

If a debt is too big for you to pay all at once, consider contacting the creditor and setting up a payment plan. Many entities will be more than happy to take a smaller amount of money over a period of time than to have to go to the trouble of going to court to get a bank levy.

Negotiate With Your Creditors

Your powers of persuasion may be a great tool for helping you settle your debt without the hassle of a bank levy.

If you think a levy may be heading your way, immediately contact your creditors and find if there’s a way you can come to an agreement.

That agreement could look like an installment plan, or it could be offering a smaller lump sum settlement to zero out your debt. If necessary, get a lawyer or a tax professional to help you evaluate your case and work with your creditor to come to a mutually agreeable solution.

Keep Separate Accounts

If you receive government funds or other money that may be exempted from a bank levy, have that money deposited into an account separate from your paychecks.

While this may not help you entirely avoid a bank levy, it will keep your protected funds separate from non-protected funds, giving you access to important money even if one of your accounts gets frozen.

Direct Deposit Government Funds

When a bank levy is put into place, your bank has to work with the creditor to evaluate whether there are any federal funds in your account that must be protected. However, these protections only extend to direct deposited federal funds, not those received via check.

If you receive government funds, including Supplemental Security Income, Social Security, or federally funded retirement or pension plan funds, have them direct deposited into your account so they can easily be tracked.

This way, if a bank levy is placed on your account, the prior two months of these federal funds will be protected from withdrawal and you’ll still be left with some money at the end of the day.

What You Can Do If The Government Places A Levy On Your Bank Account

If you find yourself with your bank account frozen because of a levy from a creditor, there are a few ways you can fight the levy or protect some of your money.

While you may be scared and feel completely powerless, taking some important steps as soon as possible can stop the levy entirely or keep some of your funds from being taken.

Here are some options available to you:

Statute Of Limitations

In some jurisdictions, the debt being collected may be too old to qualify for a bank levy.

If you have an old debt that’s being collected via a bank levy, research the laws in your state regarding the statute of limitations for collection of your debt, or speak to a lawyer in your area.

For those debts that are too old to be collected, your action may get the levy stopped completely.


While your bank is not required to notify you if your account is being frozen for a bank levy, the creditor is required to notify you of any legal action taken to get that levy.

If you were not properly notified, usually by a personal visit from your sheriff’s department or a process server, you may be able to get the levy tossed for failure or proper notification.


Creditors can - and do - make mistakes in the bank levy process. These errors can be everything from them attempting to collect an amount that’s different from what you show you owe to attempting to collect on a debt you’ve already paid in full.

If you can prove that the creditor made an error, you could get the levy dropped entirely. Or, in the case of an incorrect amount being collected, the creditor has to start the levy process all over again, buying you some time.

Stolen Identity

If your identity was stolen, the person using your name could have racked up a considerable amount of debt.

In these cases, you have to prove that it was the identity thief, not yourself, that accrued the debt, and that may get your levy thrown out. However, proving identity theft is a time-consuming process, so be prepared for a long fight if you’re in this situation.


When you declare bankruptcy, all pending debts in collection stop. This includes bank levies.

After you’ve been granted your bankruptcy, you have some time to get your finances in order and figure out how to pay back debts.

Bankruptcy does not make your debt disappear entirely, though. Instead, it just means that the creditor has to pause pursuing the levy and can restart the process in the future.

Got A Levy On Your Bank Account? We Can Help

Owing a debt, whether it’s to a private creditor or the IRS, is stressful. You’re always worried that the ringing phone is another collector harassing you about your unpaid debt.

With the help of an experienced financial professional, you can find a way to take care of your debt and get back to your regular life.

At the Credit Review, we’ve collected the top-rated professionals in a variety of categories, from student loan refinancing to tax debt relief, so you can make the best decision for your situation. Find your ideal tax relief professional today! and learn more about your tax relief options here.

Can the IRS put a levy on your bank account without giving you notice?

No. The IRS can't put a levy on your account and seize your funds without giving you proper notice.

How long does an IRS levy last?

If your bank account is levied by the IRS, your funds will be held and sent to the IRS after 21 days.

Can I stop an IRS levy?

Yes. There are several ways to stop an IRS levy, some of which include: paying your tax debt in full, appealing the levy, requesting an installment agreement, making an Offer in Compromise, or applying for the IRS Fresh Start program.

About The Author

Author Avatar

Minji Kim, LLM

Tax Attorney LLM at Anthem Tax Services

Minji Kim is currently a tax attorney at top rated tax resolution company Anthem Tax Services. With 10 years of experience practicing in tax law, Minji Kim has a Juris Doctor (JD) degree with a concentration in Taxation. After finishing her 1st year law school Taxation class, she become more interested in taxation, and she ended up signing up for a Joint Degree Program during Law School.

One year after getting her Juris Doctor Degree, Minji Kim received her Master of Laws (LL.M) degree in Tax Law. Minji was involved in numerous volunteer activities while in Law School. She particularly enjoyed being a VITA (Volunteer Income Tax Assistance) member, because she found it very interesting to see how an individual's tax numbers can change depending on different circumstances.

Minji enjoys assisting people in tax law strategy and improving their tax situation, and strives to help people understand better how taxes are involved in everyday life.

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