Bank Levy - You Owe Someone Money:
1. The IRS and other government agencies do not need a court order to issue a bank levy. ***There is a 21-day period before the funds are actually sent to the IRS. It was intended to give you a chance to dispute the levy with the IRS. This is when you should consult with an attorney if necessary. Issues with the IRS are federal, and must be litigated in the US Tax Court.
2. Private creditors must obtain a judgment against you in a lawsuit. To execute the levy, the creditor must also request a writ of execution from the same court.The sheriff's department will then serve the writ instructing your bank to freeze the money in your account.
Suspicious Activity - Your Deposit / Withdrawal Transactions Triggered a Security Flag:
1. The bank may temporarily freeze your account if it suspects illegal activity such as money laundering, cashing bad checks, check kiting or a violation of the account terms.
2. Banks take a lot of latitude with these freezes, and will often use the US Patriot Act or your account agreement as a legal reason for the freeze.
3. ***When they freeze one account, they may also freeze your debit card, savings - and any other accounts you have with that bank.
Chexsystems or EWS Reporting:
1. If you recently opened a new bank account, the loss prevention group may run an updated Chexsystems or EWS report. Or, if the bank subscribes to that service, Chexsystems and EWS will send updated negative information it receives. Also, the branch may run Chexsystems and open an account, but loss prevention may run EWS once the account is opened.
Solutions If Your Account is Frozen:
1. First and foremost, it is crucial in today's banking environment to keep backup accounts, or alternate sources to your funds.
**My 89 year-old uncle says he keeps a small, steel money box under his bed.
2. Bank Levies: In a nutshell, if your bank account is being levied you must come up with a plan to resolve the debt. You are at the point where you cannot ignore the problem, but must get assistance or devise a plan to prevent additional levies.
3. Suspicious Activities: Contact the bank in person, if possible, and speak with a manager. Get a detailed explanation of why the account was frozen and when the account funds will be available. Note: The bank should give you specific information and a date when you can access the funds. If the bank cannot give you a date when the account will be unfrozen, you should take additional action.
4. Possible Additional Action: File a consumer complaint with the bank regulator: Office of the Comptroller for National Banks, State Agency for state-chartered banks. I would also file with the CFPB. I've heard of instances where an account was frozen for 3 weeks, and the bank still could not give a date when the funds would be accessible. My suggestion in that instance was to file in local small claims court. The individual had all of the family funds ... checking, savings, debit card, CDs at the bank. In this instance, filing in small claims court got the account unfrozen once the bank received the hearing notice from the sheriff.
Some of the Ways Creditors and the IRS Locate Your Account:
1. They fun CRA reports to see if a bank or credit union has pulled your report recently, and review your personal data.
(Lexis, the Big 3, Chexsystems, etc.)
2. You paid them with a check in the past.
3. They canvas the area near where you live and work, sending levy notices to any bank or credit union in proximity. The financial institution has to respond and let them know if there is a match for your name and SSN. They also check to see if your employer or profession is affiliated with a specific credit union.
Edited by tmcgill, 25 July 2016 - 09:17 AM.