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Often, the most difficult step in the process of suing someone for money owed you is in collecting it. If someone breaches a contract or simply fails to pay you what is obviously owed you, proving it in court is generally very easy if you have a written contract and proof of your own performance. In many cases, the defendant debtor does not bother to defend the suit and defaults.
The hard part is forcing the defendant to pay you what is owed. You can demand payment by correspondence and enclose a copy of the judgment and even offer a compromise solution or payment in installments but the defendant may choose to ignore you. In this case, you have several options. One option is to place a bank levy on the defendant debtor’s bank account, and Ritholz Law can help.
What is a Bank Levy?
A bank levy is an action by a judgment creditor to freeze the funds in the judgment debtor’s bank account and to authorize, or force, the bank to release any non-exempt funds held in the account to satisfy the judgment. A private judgment creditor is not required to give notice of the levy and the debtor will not know of the levy until he or she attempts to withdraw funds from it. The judgment debtor can still deposit funds in the account, but will be unable to withdraw any, or use an ATM card linked to it, until the account is unfrozen.
Someone Owes Me Money- Can I levy on Their Bank Account?
The only way you can place a levy on someone’s bank account is to first obtain a court judgment. You have to go through the steps of filing a complaint, having it served, waiting to see if the defendant debtor responds or defaults, and then either proving your case in court or obtaining a default judgment.
In California, once you obtain your judgment, you can levy on the debtor’s bank account if you know where the account is located and the account number. To get this information, you can schedule a debtor examination whereby the debtor is ordered to appear, usually at the courthouse, to be examined by you, under oath, regarding their assets and bank accounts. You could also hire a private investigator to get this information.
Once you know the name of the bank and the bank account number, and the location of the branch where the debtor’s account is located, you have to wait 30 days after the judgment is entered to allow the judgment debtor to appeal. Once the time has expired, there are certain documents to obtain and to give to the Sheriff or registered process server to serve on the bank or financial institution where the debtor’s account is located. These include:
- A Writ of Execution and Notice of Levy from the court
- A Letter of Instructions signed and dated by you or your attorney-this contains the name of the financial institution where the account is located and account number
- Spousal Affidavit, if applicable
- Certified copy of a Fictitious Business Name Statement, if applicable
- Affidavit of Identity, if applicable
- List of Exemptions. This is required under CCP Section 681.030(c) if the defendant debtor is a natural person
- Memorandum of Garnishee-this is the bank’s response to the writ
- Court order authorizing levy on a third party’s bank account, if applicable
A levy is valid for 180 days and can only be served by the Sheriff of the county where the bank account is located or by a registered process server. You will have to pay fees to the Sheriff or registered process server. The server will have to have a bank representative complete a Memorandum of Garnishee wherein the bank states whether it will honor the levy, if an account does exist, if there are funds in the account, or that it will not honor the levy.
The Sheriff or process server will return the writ to the court with an explanation of what actions were taken. The Memorandum of Garnishee is mailed to you or your attorney. You will need a separate writ if the judgment debtor has bank accounts in different banks or counties.
What Funds are Exempt?
If you are lucky and the judgment debtor has funds in the account, there may be certain funds, however, that you may not seize. Funds that are automatically exempt from seizure pursuant to a levy include:
- Social Security payments
- Retirement pension funds
- SSI or Supplemental Security Income
- Disability insurance payments
- Veterans benefits
- Unemployment benefits
- Workers’ compensation payments
- 75% of earnings paid within 30 days of service of the bank levy
There are other funds considered exempt from levy as well. It is up to the judgment debtor to file a Claim of Exemptions within 10 days after the bank is served with the Notice of Levy and Writ of Execution along with the other documents listed herein. However, funds that are automatically exempt will be indicated as such in the bank’s Memorandum of Garnishee.
If you do receive a Claim of Exemptions, you can object and challenge the notice in court. To ensure that you are not wasting your time and money on collecting a money judgment, contact Ritholz Law, and we will get you the money that is owed to you.