A creditor froze your bank account: how much they can take, and what is protected without asking

A frozen account is the end of a process, not the start of one. Somebody sued, took a money judgment, then applied separately for a writ of execution — a judgment by itself moves no money. A levying officer serves that writ and a notice of levy on the bank, and from the moment it lands California's Code of Civil Procedure § 700.140 requires the institution not to honour a withdrawal or a cheque unless enough is left afterwards to cover the levy. Other states word it differently and arrive in the same place.

Nothing in that sequence is negotiated with the account holder, and in most states nothing warns them. The first signal is a declined card. That is worth knowing because the clocks that matter start on service of the levy, not on the day you notice.

The 25 per cent rule is a rule about paycheques

Title III of the Consumer Credit Protection Act is the source of the number. Under 15 U.S.C. § 1673(a), the amount of a person's aggregate disposable earnings subject to garnishment in any workweek may not exceed the lesser of two things: 25 per cent of disposable earnings for that week, or the amount by which those disposable earnings exceed thirty times the federal minimum hourly wage.

The second limb does the protective work at the bottom of the scale, and it is a mechanism rather than a figure: a weekly floor of untouchable pay equal to thirty hours at the federal minimum wage. Earn below that floor in a week and nothing can be taken; earn just above it and the creditor gets only the sliver above the floor, not a quarter of everything. Because the floor is a multiplier, it moves whenever the federal minimum wage does — multiply the current federal minimum by thirty rather than trusting a dollar amount printed in an article.

"Disposable earnings" is narrower than take-home pay: § 1672(b) makes it earnings less "any amounts required by law to be withheld". Tax and mandatory withholding come out first; voluntary deductions such as a pension top-up or insurance do not, so the creditor calculates against a bigger number than the one at the bottom of the payslip.

A levy on the account has no percentage at all

The reason is structural, not accidental. Section 1672(c) defines "garnishment", for the purposes of the cap, as a procedure "through which the earnings of any individual are required to be withheld for payment of any debt". Title III is addressed to earnings in the hands of whoever owes them to you. Once wages are paid and land in a deposit account they stop being earnings and become a balance, and nothing in the statute limits what fraction of a balance a levy may reach.

This is the most common misunderstanding in judgment enforcement and it fails in a predictable direction: people told the creditor "can only take 25 per cent" leave a month of wages in the account and lose the lot. The cap protects the pipe, not the reservoir.

The protection nobody has to ask for

Title 31, Part 212 of the Code of Federal Regulations is the most useful thing on this page, and it is close to invisible because it operates on the bank rather than on the debtor. Section 212.5 requires that, no later than two business days after receiving a garnishment order and enough information to identify the account holder, the institution perform an "account review" — an examination of deposits to see whether a benefit agency paid in during the lookback period, defined in § 212.3 as the two-month window ending the day before the review.

Where benefits landed in it, § 212.6 requires the bank to calculate a protected amount — the lesser of the benefit payments posted during the lookback and the balance at review — and to "ensure that the account holder has full and customary access to the protected amount, which the financial institution shall not freeze in response to the garnishment order". The next sentence is the one worth reading twice: "An account holder shall have no requirement to assert any right of garnishment exemption prior to accessing the protected amount in the account." Section 212.6(c) then makes that figure "conclusively considered to be exempt from garnishment under law". The scope, set by § 212.2(b), is payments from the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board and the Office of Personnel Management.

What makes the rule work is how blunt it is. Section 212.5(d) requires the review to be run without regard to commingled funds, a co-owner on the account, multiple beneficiaries, the balance, the nature of the underlying debt, or "instructions to the contrary in the order". The bank may not weigh any of it, and § 212.5(e) puts the review before any other step on the order that could touch the funds.

Four situations where the automatic protection does not run

• The order carries a Notice of Right to Garnish Federal Benefits. Under § 212.4, where the garnishment comes from the United States or a state child support enforcement agency with that notice attached, the bank follows its customary procedures and does not apply §§ 212.5 and 212.6 at all.
• The balance exceeds the protected amount. Section 212.6(d) is explicit that the excess is handled by the bank's ordinary procedure, "including the freezing of funds".
• The benefits are older than the lookback. Money deposited three months ago is still exempt as a matter of substantive law, but it is outside the automatic calculation. It belongs in a claim of exemption, and you carry the burden of tracing it.
• The payer was not one of the four agencies. State benefits, unemployment insurance, private pensions and disability insurance are frequently exempt under state law, and none of them get the Part 212 treatment.

One provision cuts the other way and is worth knowing. Section 212.6(g) bars a bank from continuing to garnish deposits made after the account review, or freezing later credits, unless it is served with a new order. A levy is a snapshot of a moment, not a standing instruction — which is why creditors serve them repeatedly rather than once.

Everything else is exempt only if you claim it

Outside Part 212, exemptions are a matter of state law and almost none are self-executing. The categories recur — a homestead, tools of trade, retirement accounts, public assistance, unemployment and workers' compensation, and in many states a flat sum in a deposit account — but the mechanism is uniform: a claim of exemption filed within days of the levy.

A minority of states make part of it automatic. California's Code of Civil Procedure § 704.220 exempts money in the debtor's deposit account up to the minimum basic standard of adequate care for a family of four for Region 1 under Welfare and Institutions Code § 11452, and does so "without making a claim". That underlying figure changes, so read the current one.

1. 1

   Take the date off the notice of levy

   The deadline runs from service, and how you were served changes it — California allows 15 days from personal service and 20 by post. Every other step is scheduled against that date.

2. 2

   Get the claim form from the levying officer

   It comes from the sheriff or marshal who executed the levy, or from the court clerk, and it is the only route to a hearing. Some states require a financial statement alongside it.

3. 3

   Name the statute, not just the hardship

   Section 703.520 requires a claim under oath describing the property and citing "the provision of this chapter or other statute upon which the claim is based". A claim that describes difficulty without naming an exemption fails on its face.

4. 4

   File it with the levying officer inside the window

   Filing is what suspends transfer of the funds. Take proof of the exempt source — benefit award letters, deposit records showing where the money came from.

5. 5

   Wait out the creditor's response period

   Under § 703.550 the creditor has 15 days to file a notice of opposition and a motion for a hearing. If it does not, the levying officer must immediately release the property to the extent claimed exempt.

The names differ across states — claim of exemption, notice of exemption, exemption from execution — and so do the windows. The structure does not: a short debtor deadline, a short creditor deadline, and release by default if the creditor lets its own deadline pass.

Joint accounts do not defeat the review, and do not protect the co-owner

Two questions get merged here. For the Part 212 lookback, a co-owner is irrelevant in the debtor's favour: § 212.5(d)(2) lists the existence of a co-owner among the things the bank must ignore, so a benefit deposited into a shared account still generates a protected amount.

For everything else, sharing an account with a judgment debtor exposes the balance. Most states let the levy reach the account and leave the non-debtor co-owner to prove which portion was theirs — a claim they must file, on the same short clock. California's § 700.140 at least requires the levying officer to serve the writ and notice of levy on any third person in whose name the account stands.

Getting it unfrozen

Date whatever you send. A short written notice to the bank or the creditor's lawyer, naming the account, the levy and the exemption relied on, converts a phone call into a record. Be careful with the opposite instrument: signing a debt acknowledgment or making a part payment can restart the limitation clock, which matters if the debt was near the end of its statutory life.

What this reduces to

Two rules with two different subjects. The famous quarter attaches to earnings while an employer still holds them. The account is governed by exemptions, and exemptions are either applied by the bank on its own initiative — which happens for exactly one category of money, arriving in exactly one way — or claimed by you in about two weeks.

So the practical advice is unglamorous and mostly about routing. Keep federal benefits arriving by direct deposit, into an account holding as little else as possible, and do not move them onwards to a "safer" one. Read the bank's notice the day it arrives. And if the judgment behind all of this is one you never had a chance to defend, the levy is the symptom — the judgment itself is the thing to attack.