How Long Does It Take to Release a Bank Levy?

Anyone who faces a bank levy can feel stressed. If you are currently facing a bank levy, you need to know the process for releasing it. The reason why it is important to you is because it directly impacts the way you can regain access to your funds. Check out the information about a bank levy below, including the time it takes to release a bank levy.

Definition of a Bank Levy

A bank levy is described as an order action ordered by the court of a mandate by a government that allows a creditor to take funds from the bank account of the debtor to repay their debt. This can happen in cases such as unpaid taxes (federal, state, or local), unpaid child support, or unpaid loans or credit card debt. Before it happens, the debtor will receive notice. After it is applied, the bank should freeze their bank account for a certain amount until the debt is satisfied or the levy is released.

A bank levy is also defined by several sources, such as:

• • Justia Dictionary: “A bank levy is an enforcement action used to collect debt by withdrawing money from the debtor’s bank account.”
  • Investopedia: “A bank levy is a type of taxation system on financial institutions of the United Kingdom in which banks are forced to pay government taxes over and above any normal corporate taxes that they may incur due to the risks they pose to the larger economy.” “A bank levy refers to a situation in which a bank account is frozen due to a creditor’s legal attempt to get a debtor to repay its debt.”
  • Minnesota Department of Revenue: “A bank levy is a legal action that allows us to take money from your bank account or credit union account and apply it to your debt. Once your financial institution receives our levy, they hold funds from your account for 10 days before sending them to us.”
  • Nolo: “A bank levy is a collection technique creditors use to recover money owed. Some creditors, like the IRS, have a statutory right to collect using a bank levy.”
  • Brotman Law: “A bank levy is a legal seizure of our property to satisfy a tax debt.”

The Time Needed to Release a Bank Levy

For anyone who is wondering how long it takes for a bank levy to be released, the answer can vary depending on the situation. In general, the process includes:

1. 21-day waiting period

The waiting period after a levy is placed on a bank account is usually 21 days. During this period, you will be able to reach out to the IRS or creditor to resolve the debt. Besides, you can also contact them to address any errors.

2. Resolution of debt

For those who want to release the levy, you are required to either pay off your debt in full, set a payment plan, or settle the debt. After an agreement is reached, a release letter can be sent by the IRS or creditor to the bank.

3. Processing time

Once the letter is sent by the IRS or the creditor, the process of release may be taken by the bank in a few days. If it is successful, your account will be unfreezed.

Factors that Influence the Time to Release a Bank Levy

There are a few factors that affect the time to release a bank levy, including:

• Type of creditor

The first factor that can affect the time to release a bank levy if the type of creditor. If the levy is from the Internal Revenue Service or IRS, the process of releasing it can be simpler and faster. In contrast, if the type of creditor is other than the IRS, for example the private creditors such as credit card companies or other lenders, the process to release it can vary. The debtor usually has to go through the process of negotiation. Apart from that, they also have to prove the debt has been paid. These things are what make the process long.

• Resolution of the debt

The best way to release a levy is by resolving the underlying debt. You can pay off the entire debt, set up a payment plan or instalment agreement, or provide that the debt was paid or it is not owed. After resolving the debt, a release notice will be issued by the creditor to your bank. Depending on the internal procedures, your account will be unfreezed within five to ten business days.

• Legal process

In some cases, it may be needed for you to file legal documents to be able to be against the levy or to prove that the funds are exempt, such as disability payments or Social Security benefits. Having to go through the process in the court can take time. Sometimes, it can be about a month or more.

• Exemptions and hardship requests

For your information, there are several funds that are known to be protected from bank levies. These things include Social Security benefits or veterans’ benefits. If your funds are exempt and you want to claim an exemption, you should file the proper paperwork. If the documentation is complete, it can take faster compared to when the documentation is incomplete.

Guide to Release a Bank Levy Quickly

If you want to release a bank levy quickly, you can follow the following instructions:

1. 1. The first thing that you need to do is to contact the creditor as soon as possible to make the process faster. When you are connected to them, ask them about the options to resolve the debt, which can be a lump-sum payment, a settlement, or a payment plan.
   2. In case the funds in your account are exempt from garnishment, you are recommended to file for an exemption with the court or with the creditor. Please do it as soon as possible. Make sure to provide evidence that the funds in question are exempt.
   3. It is possible for you to qualify for a levy release if you have taxes debt to the IRS and you are currently suffering from financial hardship due to the levy. For your information, a levy release due to hardship is offered by the IRS. With it, you can accelerate the process if you are able to prove that the levy is preventing you from meeting basic living expenses.
   4. Usually, it is enough for the bank to release the levy if you manage to set up a payment plan with the IRS or with the creditor. Once an agreement is met, your bank will be informed by the IRS or the creditor and after that the release process will start.
   5. In case you fail to negotiate the release of the levy by yourself, it is better for you to consider seeking legal assistance. A legal professional can help you to file a claim or contest the levy in court, especially in the case that involves exempt funds.

Bottom Line

In conclusion, the time it takes to release a bank levy can vary, depending on several factors, such as the type of creditor, the resolution of the debt, and any exemptions you may be entitled to. If you want for the process to be faster, you should act quickly, communicate with the creditor, and learn about all available options for resolving the debt.