A bank levy can be one of the most stressful debt collection actions a person can face. When a creditor freezes or seizes funds directly from your bank account, it can leave you struggling to pay for everyday expenses such as rent, groceries, and utilities. If you are dealing with aggressive debt collection in New Jersey, you may be wondering whether filing for bankruptcy can stop bank levies and help protect your finances. Understanding how these levies work, how bankruptcy laws apply, and your legal options can help you make informed decisions about your financial future. Continue reading and speak with a knowledgeable Bergen County bankruptcy lawyer to schedule your free consultation today.
What is a Bank Levy?
A bank levy is a legal action where a creditor or tax agency, like the IRS, freezes and seizes funds from a debtor’s bank account to satisfy an unpaid debt. In New Jersey, creditors typically must first obtain a judgment from the court before they can pursue collection methods such as a bank levy. Once a levy is issued, the creditor may serve the order on your bank, which can result in your account being frozen and funds being transferred to the creditor.
Common types of debt that may lead to levies include:
- Credit card debt
- Medical bills
- Personal loans
- Certain government debts, like tax obligations or child support
A bank levy can occur quickly after a creditor wins a judgment, so understanding the process can help you take action to protect your funds or explore legal remedies.
Can Bankruptcy Stop Bank Levies in NJ?
Yes, filing for bankruptcy may stop bank levies. When you file for bankruptcy, federal law creates an automatic stay, which is a legal order immediately stopping most collection actions. The temporary pause on creditor actions gives debtors breathing room to reorganize finances or discharge debts. Once the automatic stay is in effect, creditors must stop:
- Lawsuits related to debt
- Wage garnishments
- Harassing phone calls
- Foreclosures and repossession
- Enforcement of certain liens
- Bank levies
A levy cannot be started after the automatic stay is in effect. If the levy has been initiated but has not yet been completed and funds have not been transferred to the creditor, the automatic stay can potentially freeze the collection process.
Recovering the money once the creditor has already received the funds could be more complicated, so filing for bankruptcy before the funds are removed increases the chances of protecting your money. A bankruptcy attorney can evaluate whether you may still be able to recover the funds.
For more information and legal advice, consult with an experienced professional at the Law Office of Boyd & Squitieri today.