In Arizona, a bank account garnishment is a form of non-earnings garnishment. It allows a creditor to enforce a money judgment award against you by garnishing funds from your bank account.
Here, we examine how these laws apply when a creditor attempts to use legal means to access your bank account through garnishment and what you may be able to do about it.
At Stone Rose Law, we help clients understand their debt relief choices under federal law and Arizona law.
For a consultation with one of our experienced bankruptcy lawyers, please call (480) 739-2448.
How Does a Bank Account Garnishment Work?
In Arizona, creditors can seek two kinds of garnishments: garnishments against earnings and non-earnings garnishments. An example of an earnings garnishment is when a creditor seeks to enforce a money judgment by having your employer withhold compensation from your pay.
A non-earnings garnishment targets personal property that belongs to a judgment debtor, but is held by a third party. This includes money other than compensation. A bank account is an example of an asset that can be subject to a non-earnings garnishment.
The procedures and forms used to collect judgments from a non-earnings source are different from the procedures and forms needed to collect judgments from earnings.
Step One: The Creditor Obtains a Money Judgment
Most bank account garnishments in Arizona begin when a creditor files a lawsuit against you to collect a debt. Before the creditor can garnish your bank account, it must win its debt collection lawsuit and obtain a court judgment.
Step Two: The Creditor Obtains a Writ of Garnishment
Once the creditor has a court judgment against you on the underlying debt, it can request a garnishment order through an Application for Writ of Garnishment and Writ of Garnishment and Summons. This is the legal mechanism that allows the creditor to take money directly from your bank account, which is also known as a bank levy.
Before a Writ of Garnishment issues for non-earnings (including bank accounts), Arizona law requires the creditor to post a bond unless the court orders otherwise.
To levy your bank account, the creditor must serve your bank with the Writ of Garnishment that was approved by the court. When your bank receives the writ, it will freeze any money in your account.
Can Your Bank Account Be Garnished Without Advance Notice?
Once the levy is in place, the bank will notify you of the existence of the Writ of Garnishment, unless an exception applies. At the same time, the judgment creditor will serve the writ on you.
Certain government collections (e.g., IRS tax levies under 26 U.S.C. § 6321–6322 and administrative child support collections under Arizona law) proceed by separate statutory levy/offset procedures and may not require a state court writ of garnishment.
Examples include:
- The Internal Revenue Service, if you owe unpaid federal taxes
- The U.S. Department of Education, if you have defaulted on a federal student loan
- The state of Arizona, if you owe past-due child support
Limits to Bank Account Garnishment
Unlike wage garnishment, which is subject to a maximum limit on the portion of your income that can be garnished, non-wage garnishment (such as on bank accounts) has no such limit outside of certain specific exceptions — creditors can take as much as is available in the account.
The following limitations apply that can restrict what the creditor can levy against.
Exempt Funds Under Arizona Law
Under Arizona Revised Statutes (ARS) Section 12-1578(A), Arizona law exempts a statutory amount of funds in one bank account from non-earnings garnishment, adjusted annually for cost of living. If you have multiple accounts at the same bank, the exemption applies to only one of those accounts.
If you have a bank account jointly with one or more other people, a hearing may be needed to determine each person’s share of the funds. The bank must notify all account holders with an interest in the account about the garnishment.
Future Deposits
When a Writ of Garnishment is served on your bank, the bank must freeze the funds present in the account at the time of service. The judgment creditor can only collect against funds in the account on the day the writ is served on your bank. Any new deposits you make into the account after that date are not subject to the garnishment unless the judgment creditor files for a new Writ of Garnishment.
If your account is garnished and you believe some or all of the money is protected, you may be able to challenge the levy in court. Since frozen funds can be taken quickly, acting fast is important.
Certain Benefits and Aid Payments
Some specific benefits and support payments are exempt from bank account garnishment. These include:
- Social Security benefits and Supplemental Security Income (SSI)
- Veterans’ benefits
- Certain federal student aid
- Workers’ compensation benefits
Note that in Arizona, child and spousal support arrears may be collected through garnishment or other enforcement tools. Arizona law and federal priorities govern the collection process and may affect how funds are applied.
Your bank must review your accounts and automatically protect federal benefits you received by direct deposit within the last two months. But if you deposited exempt funds by check or transfer, you may need to take action to exempt these amounts.
It may be a good idea to keep any funds exempt from non-earnings garnishment in a separate account from your other income. Many online banks offer free accounts you can use for this purpose.
If you believe that exempt funds have been garnished from your account, then you should file a claim of exemption with the court as soon as you receive notice of a bank levy. The court will then set a hearing date to find out which funds in the account are protected funds, which may allow you to get back some or all of those funds.
How to Stop Arizona Wage or Bank Account Garnishments
If a creditor is suing you to collect a debt, or has already begun garnishing your bank accounts, you may be able to take action to prevent or stop the garnishment process.
Bankruptcy Can Stop Garnishment
If a creditor has filed a debt collection lawsuit or a judgment creditor is already garnishing your bank account, then filing for bankruptcy is an effective way to stop what they are doing.
As soon as you file for bankruptcy, the bankruptcy automatic stay will make creditors stop most collection efforts, including bank account garnishment, unless and until the creditor gets permission from the bankruptcy court to lift the stay.
Also, if you file for Chapter 7 liquidation bankruptcy, most unsecured debts, such as credit card balances, medical bills, and personal loans, are discharged. A creditor cannot try to collect on a discharged debt by any means, including garnishment.
Note that some debts, such as child support, most taxes, and many student loans, ordinarily cannot be discharged.
Other Ways To Stop Bank Account Garnishment
Aside from bankruptcy, you may have other means to stop a bank account garnishment or to limit its impact on you. These include:
- Paying off the debt: If you can, the quickest way to stop bank garnishment is to pay the debt in full.
- Negotiating with the creditor: Some creditors may be willing to settle for less than the full amount you owe. You may try to negotiate a lump-sum payment or a payment plan even after the creditor has won a judgment against you.
- Challenging the garnishment: If you believe the garnishment of your bank account is incorrect, you may be able to challenge it in court.
- Claim exemptions: If the money in your bank account is from one or more exempt sources, like Social Security or veterans’ benefits, you can file a claim of exemption with the court.
Are You Being Threatened With Bank Account Garnishment?
At Stone Rose Law, we have experienced bankruptcy attorneys who provide legal assistance to clients facing crushing debt. We know that if a creditor has filed a lawsuit against you to collect a debt or has already started garnishing your wages or a bank account levy in Arizona, you do not have to simply accept your fate.
If you are being pursued by debt collectors, sued for a debt, or having your bank account garnished, we can help you consider your debt relief options, whether through bankruptcy or otherwise.
To learn more about your possible courses of action and to speak with an Arizona bankruptcy lawyer in a free consultation, call us at (480) 739-2448. You can also use our online contact form to set up a free initial consultation.
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