Here’s an interesting question about bank garnishments submitted by a Florida attorney. He wants to know whether a judgment creditor can garnish a bank account or other debt where the debtor is subject to a priority lien such as an IRS lien.
Can the junior garnishment force the bank to liquidate the account, pay the priority debt, and then turn over to the garnishing creditor the balance of money in the account, or does the priority creditor cause the junior creditor’s garnishment writ to be dissolved?
I think that the writ of garnishment by the judgment creditor in this hypothetical would be like a second mortgage foreclosing on a parcel of real estate. The second mortgage foreclosure would force the sale of the debtor’s property with proceeds being first applied to pay the priority first mortgage. The bank garnishment would work the same way. The bank would answer that it holds money owed to the debtor subject to a lien in favor of the priority creditor. The garnishing creditor should be able to compel the account to be liquidated and paid to the two creditors in order of priority.
A priority creditor lien, such as an IRS lien, should not benefit the debtor by precluding a writ of garnishment against the debtor’s non-exempt bank account.