Protecting a Bank Account from Creditors

To protect your bank account from creditors, you must take advantage of the collection laws in the state where you live. When a court awards one party to a lawsuit a money judgment against the other party, the presiding judge will not write a check to the prevailing party. The judge will merely issue a written order of judgment. In some cases, the losing party voluntarily pays the judgment. In other instances, the losing party is either unable or unwilling to pay. In those cases, the prevailing party—the judgment creditor—must collect the money from the judgment debtor using collection tools afforded by the state’s collection statutes.

Typically, debtors maintain significant amounts of money in bank accounts or money market accounts at financial institutions. Bank accounts are a very attractive collection target for creditors because:

  1. They contain liquid assets.
  2. The creditor knows that the debtor needs his bank account money to pay his living expenses and attorney fees.
  3. Obtaining a writ of garnishment against a bank account is a relatively simple thing for the creditor to do.

How to Open a Bank Account That No Creditor Can Touch

To open a bank account that no creditor can touch, you must bank in a state whose laws prohibit garnishment against banking institutions. Under some circumstances the debtor does not have to reside in a state with favorable bank garnishment laws to protect accounts from garnishment.

Some states, such as South Carolina, Maryland, North Dakota, and New Hampshire, protect a small amount of money in a bank account from judgment creditors. However, you can do better by finding a bank in a state that is entirely immune from bank account garnishments. Another option for married couples is to open a joint bank account in a state that allows tenants by entireties ownership of accounts, such as Florida.

We may be able to help determine if a bank account that cannot be garnished is right for you.

Explanation of a Bank Account Levy

Protecting your bank account from creditor levy requires understanding the legal tools a creditor will likely use to freeze your bank account and take your money in the account. In Florida and most other states, the creditor’s legal tool to seize bank accounts is the writ of garnishment.

Chapter 77 of the Florida Statutes provides procedures for a judgment creditor to obtain a writ of garnishment against property of the judgment debtor. Bank accounts, money market accounts, safe deposit boxes, promissory notes, and other assets are all subject to creditor garnishment writs.

Upon a bank or stockbroker’s receipt of a writ of garnishment, the bank or stockbroker will freeze all accounts where the judgment debtor is owner or co-owner without notice. A debtor may then find himself with no available money to pay living expenses or pay his own attorneys.

The garnished bank has a time period provided by law to file with the applicable court a response stating what accounts the debtor owns and how much money the garnished bank held in each account on the day the garnishment was served.

Frequently Asked Questions

What type of bank accounts cannot be garnished?

Almost every state in the U.S. allows a civil judgment creditor to garnish a bank account belonging to the judgment debtor. The laws of these states apply equally to any type of bank, whether it be a brick and mortar bank or internet bank. A bank that cannot be garnished would have to be solely located in a state that prohibits bank account garnishments.

Can a creditor garnish your bank account without notice?

Yes, in most states, a creditor can garnish your bank account without notice. If you think about it, this makes sense. If you received advanced notice that a judgment creditor was going to garnish your account, you would probably just take out all of the money from your account. Garnishments wouldn’t work if creditors had to notify you in advance that they were going to garnish the account.

How do creditors find your bank account?

Judgment creditors can find where a debtor maintains bank accounts by using a process called post-judgment discovery, or discovery in aid of execution. Post-judgment discovery refers to the creditor collection tools that allow a creditor to find out where the debtor holds assets that are available to satisfy a judgment. These tools include inspection of the debtor’s tax returns, bank statements, financial records, and the debtor’s own testimony under oath about his assets. There also are services that search national banking records to discover a debtor’s banking history.

Can an LLC bank account be garnished?

Yes, if the judgment is against the LLC. Just like how an individual’s bank account can be garnished if there is a judgment against the individual, and LLC bank account can be garnished if there is a judgment against the LLC. However, if there is a judgment against just yourself personally, a creditor cannot directly garnish the bank account of your own LLC. The creditor would first have to get a judgment against the LLC. Typically this is done by alleging a fraudulent conveyance or claiming that the LLC is an alter-ego of the judgment debtor.

Can a creditor take all the money in your bank account?

In most situations, a creditor can take all of your money in your bank account if the money is not otherwise exempt. However, money in your garnished bank account that was deposited by another individual may be released from the garnishment freeze.

For example, if a judgment debtor shares title to a bank account with an elderly parent, the judgment debtor may defeat the garnishment by asserting that the funds do not belong to him despite his name appearing on the account title.

If your bank account is levied, can you open a new account?

A bank account levy, or garnishment, is a proceeding against your bank to turn over to the creditor any amount the bank owes to you (your account balance). However, the bank account garnishment is not an injunction on your personal banking decisions. In other words, you are free to open up additional accounts, whether at the same bank or any other bank, until a court says otherwise.

Can a debt collector garnish a joint bank account?

In general, a debt collector can garnish a joint bank account. The creditor has this ability even if the joint owner is not liable on the judgment. In a typical example, if two married spouses share a bank account together, but only one of the spouses is the judgment debtor, the creditor there could still garnish the joint account.

There are exceptions. In Florida, an account held by a married couple as tenants by entireties is protected against collection for any separate debt, so long as there are no fraudulent conveyance issues. Even in this circumstance, a creditor could still obtain and serve a writ of garnishment against the bank. But you should be able to defeat the garnishment if the account is held as tenants by the entirety.

In addition, if the money in the account is derived solely from the non-debtor joint owner, then you may have an argument that the debtor joint owner only has bare legal title to the money.

Can a savings account be garnished?

Yes, a savings account can be garnished. A bank account garnishment makes no distinction between checking accounts, savings accounts, money-market accounts, online savings accounts, or CDs. It applies to all.

How often can a creditor levy a bank account?

Under Florida law, a creditor can repeatedly levy, or garnish, a bank during the life of the Florida judgment. While the creditor cannot harass a judgment debtor, repeated levies or garnishments of bank accounts, alone, do not constitute harassment, especially if the funds in the bank account are generally not exempt.

The creditor does not have to provide any notice to the debtor prior to serving the writ of garnishment. This makes sense: if the creditor had to notify the debtor in advance before it garnished a bank, the debtor would simply withdraw all of the account funds prior to the garnishment being served on the bank. The garnishment system is an effective collection tool because it can be done without notice and done as often as the creditor suspects a financial institution is holding the debtor’s money.

How long does it take to unfreeze a bank account?

Once a garnishment starts, the entire process will typically last at least a month, but could go on for 2 months or longer. A lot depends on how the bank responds and how you respond. In Florida, the bank has 20 days after service of the writ of garnishment to file a response. Some banks do this in one day. But other banks take the entire time.

In addition, you can file a claim of exemption and request for hearing. If you do, a Court will have to schedule a hearing on your exemption claim, which may significantly add to how long it takes to unfreeze the account.

How does a levy on a bank account work?

In a bank account levy, a judgment creditor first gets a court to issue a writ of garnishment based on the amount of the judgment. A writ of garnishment is directed towards a particular bank. Then, the creditor serves the bank with the writ of garnishment. A bank that has been served a writ of garnishment must, with few exceptions, freeze all accounts belonging to the judgment debtor. This even includes joint accounts.

In Florida, the creditor must follow strict procedures when garnishing your account. One of these procedures involves mailing you a copy of the garnishment documentation, including a Claim of Exemption form. If you file the claim of exemption, you may be entitled to a hearing on the claim and could try to have the garnishment dissolved.

How long does it take to garnish a bank account?

Typically 1-2 weeks. Once a judgment creditor files a motion for a writ of garnishment, the court will typically issue the writ within a few days. Some courts/judges take longer than others. Once issued, all a creditor has to do at that point is serve it onto the bank. This does not take long.

How long can a creditor freeze your bank account?

In a bank account garnishment, an account will be frozen for the entirety of the garnishment process. This could be 1-2 months or more. Once the bank freezes the accounts, the bank can only lift the freeze after either the creditor dismisses or dissolves the garnishment, the court dissolves the garnishment, or the court enters a final judgment of garnishment that directs the disbursement of the funds in the account.

How to Hide Bank Accounts from Creditors

Judgment debtors sometimes want to know how to hide money from creditors. But, hiding a bank account from creditors is never a good asset protection strategy.

A creditor has several methods of forcing a debtor to answer questions under oath about the debtor’s financial accounts, cash on hand, and any other source of money that the debtor has available for his support. These methods prevent a debtor from effectively hiding a bank account from creditors. Some of these methods that prevent hiding bank accounts include:

  • oral deposition of the debtor under oath
  • written interrogatories (a list of questions the debtor must answer under oath)
  • requests to produce accounting statements and other financial documents
  • Florida’s standard fact information sheet (a financial statement)

Using a combination of these discovery methods, a creditor may identify all a debtor’s financial accounts wherever located or identify any person or company owning financial accounts on the debtor’s behalf.

If a debtor answers questions untruthfully, or provides misleading or incomplete answers, the debtor may be held liable for contempt of court and criminal perjury. Not only do false and misleading descriptions under oath expose the debtor to unnecessary civil sanctions or criminal liability, evasive answers will undermine the debtor’s credibility in subsequent court proceedings.

Therefore, hiding a bank account from creditors is not an effective asset protection strategy.

Protecting a Bank Account from Garnishment

Debtors can protect their bank accounts from garnishment by taking advantage of Florida’s exemptions and garnishment procedures. Florida law exempts from creditor collection money from certain sources such as social security, retirement withdrawals, and annuity distributions. Florida courts have consistently held that money from an exempt asset retains its exemption after the money is deposited in the debtor’s bank accounts.  

There are also procedural defenses to garnishment. Florida garnishment statutes impose upon creditors many procedural requirements and time deadlines. The garnishment rules are strictly enforced. A garnishment that deviates in any way from the statute’s garnishment rules should be dissolved and the funds released.

The garnishment statutes set out procedures for garnished debtors to assert a claim of exemption or other legal defenses to the garnishment. The debtor is required to challenge the garnishment in a court proceeding and obtain a court order to release garnished money. All the debtor’s garnished funds remain frozen during the time the debtor is challenging the garnishment in court.

A bank may not be held liable for retaining money in a garnished account during the time the debtor is pursuing a defense through court proceedings. However, there is an exception for social security proceeds—a garnished bank is required to release immediately from garnishment all money traceable to the debtor’s social security payments.

How to protect money after a lawsuit in Florida

Offshore Bank Accounts

Many attorneys advise clients to protect bank accounts from creditors and garnishments by opening offshore bank accounts that are not subject to U.S. garnishment statutes and writs.

However, U.S. citizens no longer can open offshore accounts in their individual name because of international anti-terrorism rules. Offshore accounts can only be established through newly formed asset protection entities such as offshore trusts or offshore limited liability companies set up through attorneys.

These offshore arrangements sometimes have disadvantages. First, offshore entities and banking is complicated and expensive, and the debtor must relinquish control over these entities and their bank accounts to offshore trustees and managers to be effective asset protection. Transfer of funds to offshore entities are subject to attack as fraudulent conveyances under the fraudulent transfer statutes.

What to Do Next

Our clients are typically concerned with protecting their bank account from garnishment. If you are facing a potential judgment, or already have one entered against you, we may be able to help protect your bank account from creditors. While most of our clients live in Florida, we are often able to help people living outside Florida with this particular issue as well. Contact us to get started.

5 thoughts on “How to Protect Your Bank Account from Garnishment”

  1. Angelo Dellolio

    What banks can’t be garnished and if it is going next do they take the money every month until what you owe them is paid off and then your account is on Frozen please let me know and can I declare bankruptcy and get rid of this

    1. Generally a bank account garnishment is a snapshot in time, not ongoing, but they can always re-garnish the account again. For your other questions please schedule an appointment.

  2. quite informative, thanks, and how about online banking to solve this problem.

    also, this method of finding banking info, it must be confidential, and I wonder how creditor attorneys manage to get around that.

  3. In FL, if a joint checking acct is opened by a married couple, without any other special designations, it is considered JTWROS by FL banks correct?
    If after an action has been initiated, Judgement, Lien enforcement, Writ of garnishment. for purposes of depositing payroll and paying bills, the couple subsequently opens a JTTEN, with no transfer of assets, direct deposit of payroll only, can that action and the timing be deemed a fraudulent conveyance by non-debtor spouse or debtor spouse?
    Thank you

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