How to Open a Bank Account That No Creditor Can Touch

If you are facing a judgment or a lawsuit, your bank account is the most vulnerable asset you own. Unlike real estate or business interests, cash in a bank account can be frozen instantly, often leaving you without access to money for rent, groceries, or legal fees.

This guide explains how bank garnishment works, which accounts are legally exempt, and how to structure your finances to protect your cash from seizure.

Can a Bank Account Be Garnished Without Notice?

Yes. In almost every state, a creditor can garnish (or “levy”) your bank account without giving you prior notice.

This surprise element is intentional. The law assumes that if a debtor were notified before the garnishment occurred, they would simply withdraw the funds, leaving nothing for the creditor to collect.

The creditor must notify you about a bank account garnishment after serving the garnishment on the bank. The garnishment notice will explain your rights in the garnishment proceeding and the process for claiming any exemptions you have.

How Does Bank Account Garnishment Work?

While a bank garnishment can feel sudden, the legal process leading up to it takes months.

The 5-Step Bank Levy Process

1. Judgment: A creditor must first sue you and win a court judgment. Note: The IRS and federal student loan collectors do not need a court judgment.
2. Discovery: The creditor may ask you to fill out a “Fact Information Sheet” or require a deposition to discover where you bank.
3. Writ of Garnishment: The creditor applies to the court for a “Writ,” which directs your specific bank to freeze funds.
4. The Levy: The bank receives the writ and immediately freezes your funds up to the judgment amount.
5. Notice to Debtor: After the freeze, the bank sends you a notice. You then have a strictly limited window to file a “Claim of Exemption.”

Bank Levy vs. Garnishment: What is the Difference?

You will often hear the terms “Bank Levy” and “Bank Garnishment” used interchangeably, but there is a nuance:

• Garnishment usually refers to the court order sent to a third party (like a bank or employer) to hold your assets.
• Levy refers to the actual act of seizing the property.
• IRS Bank Levy: The IRS uses the term “levy” almost exclusively. Unlike private creditors, the IRS does not need a court order. Instead, they only need to send you a “Final Notice of Intent to Levy” 30 days beforehand.

What Is an Exempt Bank Account?

An exempt bank account is a financial account containing funds that are legally protected from seizure by judgment creditors. If your account contains only exempt funds, a creditor cannot legally keep that money. However, the bank may still freeze the account temporarily until you prove the source of the funds.

Common Examples of Exempt Funds:

• Social Security & Disability (SSDI/SSI)
• Veterans Benefits (VA)
• Child Support & Alimony
• FEMA Disaster Assistance
• Workers’ Compensation
• Police & Firefighter Pensions

Our Tip: The most effective way to protect these funds is to keep them in a separate, dedicated account. Do not mix (commingle) exempt Social Security funds with non-exempt wages or gifts. Commingling makes it difficult to prove which dollars are protected.

Are Proceeds from the Sale of a Home Exempt?

In Florida, cash proceeds from the sale of your primary residence (homestead) are exempt from garnishment, but only if you meet two strict conditions:

1. Segregation: You must keep the money in a separate account (do not mix it with other funds).
2. Intent: You must intend to use the money to buy a new Florida homestead within a reasonable time.

After you purchase a new Florida homestead, you will lose the protection on the remaining funds.

How to Open a Bank Account That No Creditor Can Touch

There are five ways to open a bank account that no creditor can touch: (1) use an exempt bank account, (2) establish a bank account in a state that prohibits garnishments, (3) open an offshore bank account, (4) maintain a wage or government benefits account, and (5) use a business bank account.

1. Use an Exempt Bank Account

For married couples in Florida, a Tenants by the Entireties (TBE) bank account is one of the strongest asset protection tools available.

If a creditor has a judgment against only one spouse, they cannot garnish a properly titled TBE account. The money is safe.

However, be careful with the signature card and bank account agreement. If on either document you disclaim TBE protection, you will lose the exemption.

2. Establish a Bank Account in a State That Prohibits Garnishments

Another strategy is to open an account with a bank located in a state that is unfriendly to garnishments that does not have branches in your home state.

If a state’s laws do not permit creditor garnishment of bank accounts, the debtor can maintain protected cash to pay living expenses and legal bills. Ideally, the debtor will not have to reside in the state with protected bank garnishment laws. That way, a Florida debtor could open an account in the protected bank.

3. Open an Offshore Bank Account

For significant assets, the ultimate protection is an offshore bank account, typically held within an offshore asset protection trust (such as a Cook Islands Trust).

U.S. judges do not have jurisdiction over foreign banks. A creditor cannot simply mail a writ to a bank in Nevis or the Cook Islands.

To seize these funds, a creditor would have to restart their lawsuit in the foreign country, post a bond, and prove their case under local laws—a nearly impossible and prohibitively expensive process for most creditors.

4. Maintain a Wage or Government Benefits Account

You can create a protected account by strictly limiting deposits to funds that are exempt by law.

In Florida, wages of a “Head of Family” are exempt from garnishment. If you deposit these wages into a separate bank account and do not mix them with other money (like spouse’s income or gifts), the funds remain exempt for up to six months.

In addition, federal law protects Social Security, VA benefits, and disability income. If you open a specific account solely for these direct deposits, the bank is federally required to protect 2 months’ worth of benefits automatically.

5. Use a Business Bank Account

Using a business bank account can shield funds from a personal judgment. By keeping money inside a company rather than distributing it to yourself, you create a legal barrier against garnishment.

If a creditor has a judgment against you individually (and not your business), they cannot garnish your business bank account directly. Instead of seizing the bank account, the creditor must target your ownership interest in the company.

For corporations, a creditor can levy (seize) your stock shares, potentially taking control of the company assets.

For multi-member LLCs and partnerships, the creditor’s exclusive remedy against a multi-member LLC is a charging Lien. This means the creditor only gets money if and when the LLC distributes profit to you. If the LLC chooses not to make distributions, the creditor gets nothing.

With a properly drafted operating agreement, a debtor can sometimes access business funds (via loans, salary, or expense payments) without triggering a formal distribution that would be caught by the charging lien.

Fintech & Digital Wallets

A common misconception is that “fintech” apps or digital wallets are “off the grid” and invisible to creditors. This is false. Here is the reality for the most popular apps:

Can Cash App be garnished?

Yes. Cash App is not a bank, but it partners with banks (like Sutton Bank or Lincoln Savings Bank) to hold your funds. Block, Inc. (Cash App’s parent company) complies with valid court orders and levies.

Is Chime an exempt bank account?

No. Chime is a financial technology company, not a bank. Its banking services are provided by partner banks (such as The Bancorp Bank or Stride Bank). These banks are FDIC-insured and fully subject to state and federal garnishment laws. If a creditor serves a writ on The Bancorp Bank, your Chime funds can be frozen.

Can PayPal and Venmo be garnished?

Yes. PayPal and Venmo are subject to levies just like traditional banks.

How to Hide Bank Accounts from Creditors

Proper asset protection planning does not involve hiding bank accounts from creditors. It is critical to understand the legal difference between asset privacy and asset concealment.

• Privacy (Legal): Structuring your assets so they are difficult to find in a public database search before a lawsuit begins.
• Concealment (Illegal): Lying about your assets under oath, failing to disclose accounts in discovery, or using someone else’s name to hold your money. This constitutes fraud and perjury.

While you cannot lie to a court, there are three ways to make it harder for a creditor to find your bank accounts:

1. Use LLCs: Instead of holding assets in your personal name, hold them in a Multi-Member LLC or a specialized Trust. This prevents your name from appearing on direct asset searches.
2. Avoid Big Banks: National banks (like Chase, Wells Fargo, or BOA) are the first places creditors send garnishment writs because they know most people bank there. Using a small, regional bank (especially one out-of-state) makes you statistically harder to locate.
3. Offshore Trusts: An offshore trust provides the highest level of privacy. While you must disclose the trust if ordered by a judge, the creditor cannot easily access the bank records or seize the funds without navigating a foreign legal system.

States That Prohibit Bank Garnishment

Bank account garnishments are governed by state law. Some states have laws that limit a creditor’s ability to garnish a bank account.

Here are the states that prohibit bank account garnishments when the account holds only a small amount of money:

• South Carolina
• Maryland
• North Dakota
• New York
• New Hampshire

Depending on the type of judgment, there are other states where banks are totally immune from bank account garnishment. However, for most people, there are only a few banks in the U.S. that cannot be garnished to satisfy a monetary judgment.

Finally, some states have laws that prohibit wage garnishments for consumer debts. These states include:

• North Carolina
• South Carolina
• Pennsylvania
• Texas

A Note on Exempt Bank Accounts in Texas

Texas is unique. The Texas Constitution offers powerful protection against wage garnishment. However, Texas does not prohibit bank account garnishment. Once your wages are deposited into a Texas bank account, they lose their “wage” status and become general cash, which a creditor can seize.

Texas residents must be vigilant about not keeping large balances in standard checking accounts if they have active judgments.

How to Stop a Bank Garnishment

If your bank account is frozen, you have roughly 20 days from the date you receive the notice to take action. Here are the steps:

1. File a Claim of Exemption: You must file a form with the court (and send a copy to the creditor/sheriff) stating why the funds are exempt (e.g., “Head of Family wages” or “Social Security”).
2. Dissolve the Writ: If the creditor failed to follow proper procedure, your attorney can file a “Motion to Dissolve the Writ.”
3. Negotiate: Often, showing the creditor proof that the funds are exempt (like a bank statement showing only Social Security deposits) will convince them to voluntarily release the account to avoid a court hearing they will likely lose.

Frequently Asked Questions