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Dear Bankruptcy Adviser,
My bank account was
just levied. They wiped out the account. Can they take child support money or
my husband's money that was in the bank? Can they keep taking direct deposits
that come into the account from a job? Should I file bankruptcy? Please help;
we have nothing, not even food in the house.
-- Erin
Dear Erin,
You ask a lot of very important questions.
And people in your situation need to act quickly to avoid continuous bank levies.
Yes,
the creditor can continue to execute bank account levies until the debt owed is
paid in full. Your income and child support money are not protected unless you
prove to the court that the money in your account is from child support. Until
then, the account is susceptible to continuous creditor levies. In
most states (and possibly in all 50 states plus D.C.), creditors cannot take funds
specifically paid for the support of a child. However, you, not the creditor,
not the bank and not the court, are responsible to prove that specific funds are
exempt (i.e., protected) from creditor claims. You need to file documents with
the specific court that issued the judgment. Most courts have
the necessary documents on their Web sites. This paperwork must be completed properly
and you will need to demonstrate to the court and to the creditor the funds' exempt
status. A hearing will likely follow in which you will be required to prove your
claim of exemption. However, employment wages are not exempt.
These funds can continually be either garnished directly from your paycheck or
levied directly from your bank account. It appears that you
may be commingling funds from a job with child support funds. Commingling means
that you have different sources of income mixed together into one specific account.
You will have to prove which funds are from which source. Most
courts take the "first in, first out" method of evaluating commingled funds. This
means that the first money deposited into the account is also the first money
withdrawn. If the child support funds are deposited on the first of each month
and wages are deposited on the second day, then subsequent withdrawals will be
considered as withdrawals of the child support funds first and the wages second.
Therefore, you will need to trace the deposits and withdrawals to prove which
funds are exempt and which are not. At this point, you need
to take a thorough assessment of your financial situation to determine whether
bankruptcy is your best option available. For example, if this is the only creditor
to whom you owe money then bankruptcy might not be worth it. You might be able
to settle with this company or start a payment plan in which the creditor agrees
to accept a monthly payment in lieu of continuous, unexpected bank levies. Right
now, you are informally in bankruptcy. Meaning, you owe money that you cannot
afford to pay, but you have not formally filed for bankruptcy relief. Because
you have not taken the proactive approach to address this issue, you are now reacting
to the perpetual status of financial uncertainty. This is an untenable position
to be in and one that will not simply go away. Even if you
cannot afford to hire an attorney, you also cannot afford to face one bank levy
after another. An attorney will be able to give you a strategy to avoid bank levies
and advise you on the best approach to handle this issue. While you do not need
an attorney to file for bankruptcy, you might want to seek professional advice. For
those who cannot afford legal representation, many cities have nonprofit organizations
that can assist you with the paperwork -- either to file bankruptcy or to properly
exempt income from creditor claims. You might qualify for free legal representation. | 
