How to Open a Bank Account That No Creditor Can Touch

What Is a Bank Account Garnishment?

A bank account garnishment is a legal process where a creditor takes money directly from a debtor’s bank account to collect on an unpaid judgment. This allows the creditor to recover funds if the money in the account is not legally exempt.

How Does Bank Account Garnishment Work?

Creditors commonly use bank account garnishment as a way to collect debts. The process involves four main steps:

1. Obtaining a Court Judgment – The creditor must first sue the debtor and win a court judgment for the debt.
2. Filing a Garnishment Request – The creditor files a garnishment request with the court.
3. Serving the Bank – The court issues a garnishment order, which is served on the debtor’s bank.
4. Freezing Funds – The bank freezes the account funds to satisfy the debt up to the judgment amount.

If successful, the creditor receives the non-exempt funds directly from the account.

How to Stop a Bank Account Garnishment

You can stop a bank account garnishment by filing a claim of exemption or objecting to the garnishment in court. To challenge the garnishment, you must prove:

• The funds in the account are exempt (e.g., Social Security, disability, or other protected income).
• The creditor failed to follow proper legal procedures.

If the court agrees, the garnishment order may be dissolved, and the frozen funds could be released back to you.

Protecting Your Bank Account

The best way to prevent a bank account garnishment is to protect your funds in advance. Certain bank accounts, like those holding exempt income or accounts in specific jurisdictions, may be harder for creditors to garnish.

December 2024 Update

In 2024, our clients faced bank account garnishments more than any other collection remedy. There have not been any new laws enacted for 2025 that would make garnishments more difficult for creditors, so we do not expect this trend to change.

Ways to Open a Bank Account That No Creditor Can Touch

1. Open an exempt bank account.
2. Open a bank account in a state that prohibits garnishments.
3. Open an offshore bank account.
4. Maintain a wage or government benefits account.

What Is an Exempt Bank Account?

An exempt bank account is a bank account protected from garnishment under state or federal law. Creditors cannot seize funds in these accounts to satisfy a judgment. The most common types of exempt bank accounts include:

• Tenancy by Entireties Accounts – Joint accounts held by married couples.
• Wage Accounts – Accounts containing wages protected under state law.
• Retirement Accounts – Accounts holding funds like IRAs and pensions.
• Homestead Accounts – Accounts tied to a protected homestead property.

How Do Tenancy by Entireties Accounts Work?

In Florida, a bank account jointly held by a debtor and their spouse is exempt from garnishment if only one spouse owes the debt. However, if both spouses are responsible for the debt, the account is not protected.

Importantly, Florida law applies to entireties accounts even if the account holders live outside the state. A debtor does not need to reside in Florida to maintain a protected tenancy by entireties account in a Florida bank.

To ensure an entireties account is exempt:

1. Open the account at a state-chartered Florida bank that explicitly offers tenancy by entireties accounts.
2. Confirm that the entireties designation appears clearly on account documentation, such as monthly statements.

Some banks do not automatically offer entireties accounts. Choosing the right bank and confirming the account’s status can avoid issues later.

What Happens if a Tenancy by Entireties Account Is Garnished?

If a creditor serves a garnishment writ on a bank holding an exempt tenancy by entireties account, the bank will freeze the account until the exemption is confirmed. The debtor must:

1. Hire an attorney to file a claim of exemption in court.
2. Obtain a court order to dissolve the garnishment.

The bank is not liable for freezing the funds during this process, even if the account is later found to be exempt.

States that Prohibit Bank Garnishments

Bank account garnishments are legal in most states. However, some states provide additional protections, particularly for low account balances or specific types of debts.

States That Protect Low Bank Balances

Five states prohibit garnishments for low account balances:

• South Carolina
• Maryland
• North Dakota
• New York
• New Hampshire

States That Prohibit Wage Garnishments for Consumer Debts

Four states do not allow wage garnishments for consumer debts:

• Texas
• North Carolina
• South Carolina
• Pennsylvania

How Debtors Can Protect Bank Accounts

Debtors can protect their bank accounts by opening accounts in states that prohibit garnishments. If a creditor attempts to garnish the account, the debtor’s funds remain protected while they handle legal proceedings or claims for exemptions.

Do You Need to Reside in These States?

In many cases, a debtor does not need to live in a state with protected bank garnishment laws to open an account there. This allows debtors from other states to deposit funds in a bank located in a more protective jurisdiction.

However, fewer states completely ban creditor garnishments of bank accounts regardless of the balance. Most banks in these states also require customers to reside within the state, which can make opening an account more difficult for out-of-state debtors.

Offshore Bank Accounts

An offshore bank account is a bank account located outside the United States. While not technically an exempt account, in practice, it is very difficult for a judgment creditor to reach funds sitting in an offshore bank account.

A court must have jurisdiction over the offshore bank and over the funds themselves to issue a garnishment directed towards the offshore bank.

Wage and Government Benefit Account

Some states have laws that exempt the garnishment of wages of the head of the family. In addition, most federal benefits, such as social security or disability payments, are exempt from garnishment by federal laws.

Protection of these funds remains after they are deposited into the debtor’s bank account, but only if the judgment debtor can trace the funds to their exempt source. Tracing is easiest when a bank account contains only funds from the exempt source. Judgment debtors should not mix exempt and non-exempt funds in the same bank account.

Can a Bank Account Be Garnished Without Notice?

Yes, your bank account can be garnished without prior notice. A bank account garnishment occurs when a creditor obtains a court order to freeze funds in your account to satisfy a debt. While creditors must notify you of the lawsuit that leads to the garnishment, they are not required to warn you before the garnishment happens.

Once the bank receives the garnishment order, your funds are immediately frozen. Only after the money is frozen will you receive notice of the garnishment.

The notice of garnishment will explain your rights in the garnishment proceeding and the process for claiming any exemptions you have.

What Is a Bank Account Levy?

A bank account levy is another name for a garnishment, which is a freezing of a bank account to collect a judgment.

To obtain a bank account levy, a creditor first must file a motion to freeze the bank account and serve the order at the bank. The bank will comply with the order and allow the creditor to fully withdraw all funds from the account to satisfy the judgment.

Under Federal collection law, government agencies can levy bank accounts to satisfy government debt, such as sanctions, fines, or restitution orders.

Bank Account Garnishment Laws

In Florida, bank account garnishment is governed by Chapter 77 of the Florida Statutes. This process allows judgment creditors to collect debts directly from a debtor’s bank accounts.

How Bank Account Garnishment Works

1. Court Order – Under Section 77.03, a creditor can ask the court to issue a writ of garnishment.
2. Serving the Bank – Once the court approves, the writ is served on the bank.
3. Freezing Accounts – According to Section 77.06, the bank must freeze all accounts and safe deposit boxes under the debtor’s name, even if the account is jointly owned.

Key Points About Florida Garnishment

• Banks, Not Accounts, Are Garnished – Creditors garnish the bank itself, not specific accounts. The creditor does not need to identify which accounts the debtor owns.
• Bank’s Responsibility – Upon receiving a writ of garnishment, the bank must freeze all accounts tied to the debtor, whether the debtor owns them partially or entirely.
• Exemptions – Banks do not determine if the debtor’s funds qualify for garnishment exemptions. It is the debtor’s responsibility to assert applicable exemptions (e.g., wages, Social Security benefits) or prove that funds in the account belong to someone else.

Defenses to Bank Account Garnishments

You can defend against a bank account garnishment by claiming state and federal exemptions or asserting procedural defenses.

1. Claim State and Federal Exemptions

Florida debtors can protect money in their bank accounts from garnishment by taking advantage of the state’s exemptions and garnishment procedures. Florida courts have consistently held that money distributed to a debtor from an exempt source retains its exemption after the exempt money is deposited in a bank account.

Social security payments cannot be garnished by a judgment creditor.

Even after a bank receives a writ of garnishment, it must immediately release all money traceable to the debtor’s social security payments.

A judgment creditor can still try to garnish a bank even if the debtor’s accounts have only exempt funds. A creditor is rarely liable for an unsuccessful writ of garnishment.

2. Assert Procedural Defenses

There are also procedural defenses to garnishment. Florida garnishment statutes impose upon creditors many procedural requirements and time deadlines. The garnishment rules are strictly enforced. A garnishment that deviates in any way from the statute’s garnishment rules should be dissolved and the funds released.

Using a Business Account to Avoid Bank Garnishment

You can use a business bank account to avoid garnishment of your personal money.

A person who owns a business can keep funds in their business instead of distributing it to themselves.

If the creditor has a judgment against the individual and not the business, the creditor cannot garnish the business bank account directly. Instead, the creditor must focus its collection efforts on the debtor’s ownership interest in the business.

The creditor could levy on the debtor’s stock in a corporation. If the business is a partnership or a  multi-member LLC, then the judgment creditor’s exclusive remedy in Florida would be a charging lien on any distributions from the LLC to the judgment debtor. If the LLC does not make any distributions, then the creditor gets nothing.

There are sometimes ways for the judgment debtor to obtain money in a multi-member LLC or partnership bank account without the LLC having made a distribution. The methods available depend on the language in the LLC operating agreement or partnership agreement.

How to Hide Bank Accounts from Creditors

Hiding a bank account from creditors is usually not an effective asset protection strategy.

Judgment creditors can find where a debtor maintains bank accounts by using post-judgment discovery, or discovery in aid of execution. A creditor has several methods of forcing a debtor to answer questions under oath about the debtor’s financial accounts, cash on hand, and any other source of money that the debtor has available. The creditor’s many discovery tools prevent a debtor from effectively hiding a bank account from creditors, other than lying under oath.

A creditor can find out where you bank through a deposition, written interrogatories, bank records, fact information sheet, or a review of federal tax returns.

Creditors can usually identify a debtor’s financial accounts wherever they are located or identify any person or company owning financial accounts on the debtor’s behalf.

What Happens If You Don’t Tell the Creditor Where You Bank?

If a debtor answers questions untruthfully or provides misleading or incomplete answers, the debtor may be held liable for contempt of court and criminal perjury. Not only do false and misleading descriptions under oath expose the debtor to unnecessary civil sanctions or criminal liability, but evasive answers also undermine the debtor’s credibility in subsequent court proceedings.

Proper asset protection planning does not involve hiding assets from creditors.

How Much Can Be Garnished from a Bank Account?

There is no limit to how much money that can be garnished from your bank account to satisfy a judgment. If a judgment is entered against you, the court may authorize your creditor to garnish all of the money in your account.

Even exempt money will be temporarily frozen through a garnishment, except fro social security deposits. You must claim an exemption over the funds to get them unfrozen.

How Long Does It Take to Garnish a Bank Account?

A bank account garnishment takes 3-6 months. Here are the steps:

• The creditor requests a writ of garnishment from the court (a few days)
• The creditor serves the writ onto the bank, which freezes the accounts (immediately upon being served).
• You have 20 days to file a claim of exemption after receiving notice.
• If you don’t file a response, the creditor will get a judgment of garnishment after the bank answers the garnishment.
• If you do file a response, you will have an expedited hearing on your claim of exemption.

Can You Still Open a New Account While It’s Garnished?

When your bank account is garnished, you can still open a new account. A bank account garnishment against one bank does not prevent you from opening other bank accounts.

Frequently Asked Questions