Stopping a Bank Levy

A bank levy freezes the money in your account for a judgment creditor. Filing bankruptcy stops the levy and, if the funds have not yet been turned over, usually gets them released. Money already taken can sometimes be recovered: a levy of more than $600 within the 90 days before filing is a preference the trustee can claw back.

The debit card just got declined

You tried to buy groceries and the card was refused. You opened the banking app and the balance is there, but next to it is a word like "hold" or "restraint," and the customer service line says a legal order came in and they can't discuss it. Rent is due in six days.

That's a levy. A creditor with a judgment against you got a writ of execution from the Superior Court, handed it to the sheriff or a registered process server, and the levying officer served it on your bank. The bank froze what was in the account up to the amount of the judgment plus costs and interest. The money isn't gone yet. Under California procedure the bank holds it for a period of days before sending it to the levying officer, who then holds it a while longer before paying the creditor.

That window is the whole reason to move quickly. Frozen money can be released. Money that has reached the creditor is a much harder problem.

Two ways to stop it, and which one fits

California gives you a state-law path and a federal one, and they don't do the same thing.

The state path is a claim of exemption filed with the levying officer. You have a short window, counted in days from the notice of levy, to assert that the funds are exempt: Social Security or disability benefits, recently deposited wages (75% of paid earnings from the prior 30 days are protected under System 1), or a modest baseline amount that California now shields in a deposit account automatically. The creditor can oppose, and a court commissioner decides. This works well when the account holds nothing but protected income. It does nothing about the judgment itself, which keeps accruing interest and can be levied again next month.

The federal path is filing a Chapter 7 or Chapter 13. The automatic stay stops the levy in its tracks, we notify the sheriff's civil division and the bank the same day, and the frozen funds are released back into the account as long as we can exempt them in the schedules. The judgment, the credit cards behind it, and every other unsecured debt are then dealt with in the case. The wage garnishment that usually follows a levy never gets started.

The right one depends on whether this levy is a one-time problem or the first of many. A retiree whose only account holds Social Security has an exemption claim, not a bankruptcy case. A working person with $40,000 in cards and one judgment at the levy stage will see more of these.

Getting money back that was already taken

If the levy cleared before you called, all is not necessarily lost.

The Bankruptcy Code treats any transfer to a creditor within 90 days before filing, on account of an old debt, as a preference if it exceeds $600. A bank levy is a transfer. The trustee can demand that the creditor return it to the estate. If the recovered money is exempt, say under the System 2 wildcard, it comes back to you. If it isn't, it goes to pay creditors generally, which still beats having one aggressive creditor take it all.

Whether this is worth pursuing depends on the amount. A trustee won't chase $800. For a $6,000 levy, we'll usually make the demand ourselves, and creditors' attorneys who know the rule often return it without a fight. Timing decides everything: 91 days after the transfer, the right is gone. That is why we ask for the exact date the bank took the money on the first call.

What to do in the next 24 hours

Some of this you can do before we ever speak.

• Get the paperwork. The bank has a copy of the notice of levy and the writ. Ask for it, or find the creditor's name and the Superior Court case number on the notice mailed to you.
• Stop depositing into that account. A levy attaches what was there when it was served, but a creditor can serve another one, and paychecks landing in a frozen account are a problem.
• Don't move money to a relative's account. Transfers to insiders within a year before filing are recoverable by the trustee and have to be disclosed under oath. It makes a clean case messy.
• Write down what was in the account and where it came from. Wages, Social Security, a tax refund and a gift are treated differently.
• Call us. If the levy is fresh, we can often file within a day or two on a payment arrangement and get the release started before the bank's holding period runs.

Judgment creditors in Los Angeles County work a pattern. Bank first, because it's fast. Wages next, because it's reliable. Then a debtor's examination downtown if neither turns up enough.

Chapter 7 or Chapter 13 for a levy

For most people with a bank levy, Chapter 7 is the tool. The judgment is an unsecured debt, it's discharged, and the case is over in three or four months. The attorney fee is $1,850 for a typical case, the court charges $338, and the two required courses are roughly $15 to $50 each.

Chapter 13 makes sense when the levy is a symptom of something bigger: a house with mortgage arrears, income over the median that would fail the means test, or a prior Chapter 7 inside the eight-year window. It still stops the levy on day one. The judgment is paid, in whole or in part, through the plan instead of being wiped out at discharge.

One thing Chapter 7 can't do is protect a co-signer or a spouse who isn't filing. If the account is joint and the judgment is against both of you, the case may need to be joint too. That's a conversation for the first call, and our comparison of the two chapters covers the rest of the decision.

A levy the case can't fix

Two situations come up where filing won't solve the levy, and we say so.

A levy for child support or spousal support isn't stopped by the stay, and the debt isn't discharged. A levy by a taxing agency for a tax that doesn't meet the three-year, two-year and 240-day rules pauses during the case but survives it. A Chapter 13 can still spread those payments out; it doesn't make the tax go away.

And a levy on an account that holds only Social Security is the creditor's problem, not yours. Those funds are exempt, federal rule requires the bank to protect two months of directly deposited benefits, and a claim of exemption handles the rest. We've told plenty of callers in that spot to keep their $1,850 and file the state form instead.

From Naomi

the thing about a levy is that it's silent until it isn't. No phone call, no warning, just a declined card at Ralphs on a Tuesday. A client last winter found out when his rent check bounced, and by the time he reached me the bank was two days from sending the money to the sheriff. We filed the next afternoon. The release took a week to work through the bank's legal department, which felt like a year to him, but the money came back. Had he waited for the creditor's next letter, it would have been gone, with only the 90-day clock left.

Questions people ask about this

Written and reviewed by Naomi Reyes-Ashford, Certified Specialist in Bankruptcy Law, State Bar of California Board of Legal Specialization. Last reviewed September 2026.