What types of income are exempt from a bank levy?
A bank levy can drain your account, but not everything in it is fair game for creditors. Here's what's untouchable.
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A debt collector freezing your bank account is one of the more jarring financial experiences you can face. One day, your balance is intact; the next, you can't pay rent or buy groceries because your funds are frozen and therefore inaccessible to you. And, while that can seem like an unlikely outcome, a bank levy isn't a distant threat for the tens of millions of Americans carrying debt in collections. If that debt remains unpaid and a judgment is issued in court, a bank levy is a real possibility.
That bank levy can materialize with little warning once a creditor obtains a court judgment against you . What most people don't know, though, is that a bank levy is not a blank check for creditors to use. Federal and state laws carve out specific protections designed to ensure that delinquent borrowers can meet their basic living expenses, even in the middle of a debt dispute. These protections mean that certain income sources are simply off-limits, regardless of what you owe or to whom.
But those protections don't activate automatically in every case, and they don't apply to every dollar in your account. Whether your funds are shielded from a levy depends largely on where the money came from in the first place. So what types of income are exempt from being frozen by a bank levy ? That's what we'll detail below.
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What types of income are exempt from a bank levy?