If a creditor obtains a judgment against you in court, they can levy your bank account to recover the debts that you owe to them. This can make an even bad situation worse, and take away money that you need to pay your mortgage, automobile, and utility bills.
When an individual defaults on an unsecured debt like a credit card or medical bill the debt goes to a collection agency or with a law firm that will file a lawsuit and serve the debtor with a summons and complaint. If the summons isn’t answered, the creditor will gain a judgment that allows it to garnish wages and levy bank accounts. This can become even more costly than the original debt, as the amount owed will include attorney fees, interest, and any other costs that have been incurred in order to collect the debt.
Now, if you plan to file bankruptcy, part of the process is that once the bankruptcy petition is filed, all creditors get an automatic stay notice, informing them that all collections, garnishments, and levies must stop. This can take a while, especially if your creditor is a large bank or there are third parties involved. The bottom line, is that once the bankruptcy is filed, the levy must legally stop. Depending on whether you file a chapter 7 or a chapter 13 bankruptcy, one of two things will happen to the debt still owed. In chapter 7 bankruptcy, there is a good chance that the liquidation of non-exempt assets will be used by the trustee to pay back debts and if there is no money left over, the unsecured debt is typically discharged. In a chapter 13 bankruptcy, the money owed is typically factored into the repayment plan that is created in this type of bankruptcy.
A levy on your checking or savings account is a horribly violating feeling, and can certainly exacerbate an already dire financial situation and wreak havoc on your credit rating. If you have a levy on any of your bank accounts or are having your wages garnished, you should contact bankruptcy lawyers in Citrus Heights immediately to find out your legal rights against this invasion and get the financial restart you most likely need.