Glossary
Bank Levy
A bank levy is a court-authorized process in which a judgment creditor has funds in a debtor's bank account frozen and turned over to satisfy a judgment.
A bank levy, sometimes called a bank garnishment or bank execution depending on the state, is one of the most direct ways to collect a money judgment against a business. After obtaining a judgment, the creditor gets a writ of execution, writ of garnishment, or similar order from the court and has it served on the bank where the debtor holds an account. The bank then freezes funds in the debtor's name up to the amount owed and, after any required waiting period, turns them over through the sheriff, marshal, or court.
The procedure varies by state. States differ on which officer serves the levy, how long the bank holds the funds, what notices must be given to the debtor, and how the debtor can claim exemptions. Most exemption laws protect individuals, such as wages or certain benefits, and generally offer little protection for business accounts, though rules differ. A levy usually reaches only the funds in the account when it is served, so timing matters. Many creditors try to serve levies on days when deposits are likely, such as after the debtor's own customers typically pay.
Here is a fictional example. A temporary staffing firm, Keystone Staffing Partners, holds a $41,000 judgment against a logistics company. A debtor examination revealed that the company banks with a regional bank and that its largest customer pays on the fifteenth of each month. Keystone's attorney arranges for the levy to be served on the sixteenth. The bank freezes $29,000, which is later turned over to the creditor, and Keystone continues to pursue the remaining balance.
A bank levy matters to a creditor because it reaches cash directly, without needing the debtor's cooperation. Knowing where the debtor banks is the hard part, which is why post-judgment discovery and debtor examinations are often the step that makes a levy possible.
Example
Keystone Staffing Partners times its levy for the day after the debtor's largest customer usually pays, freezing $29,000 toward a $41,000 judgment.