If you owe money to a debt collector, the federal government, or another financial institution, the last thing you want is for them to take the money directly from your bank account. However, debt collectors may garnish your bank accounts in Texas under certain circumstances. Bank account garnishments can cause significant stress and make it nearly impossible to pay your regular bills.
Debtors can wake up one day to find their bank accounts frozen, a long time after the debt collection lawsuit began. The most important thing with frozen bank accounts is to act fast. You may have time to recover some funds in your accounts before the Writ of Garnishment is finalized and your bank pays the creditors. Hiring an experienced debt collection attorney is the best way to protect your rights in these situations.
Ronald Arthur Stearns Sr. PLLC
If you have unpaid debts or unpaid taxes, the best thing to do is hire an experienced tax attorney immediately. Ronald Arthur Stearns Sr. PLLC can help you avoid garnishment by advising you on your legal rights, assessing whether you are eligible for federal benefits, and helping you set up a payment plan that works within your financial means.
Ronald Arthur Stearns Sr. PLLC works on behalf of Texas taxpayers to protect their rights and ensure that fair debt collection practices are upheld. He has over 26 years of experience fighting aggressively for taxpayers’ rights and he has gained significant experience and accomplishments throughout his years of practice.
He personally handles every case that comes into his office and he offers tailor-made legal strategies for all of his clients. When your personal finance is at risk, it is important to have a tough legal representative by your side.
Call our law firm today for an initial consultation at 210-853-2135.
Understanding the IRS Tax Levy Process
A tax levy is a legal procedure through which the IRS seizes assets, including funds from bank accounts, to satisfy unpaid federal tax debts. While it may be unsettling to contemplate the IRS accessing bank accounts without explicit authorization, it’s essential to recognize that this process follows a set of established procedures.
- Notice of Tax Debt: The initial step in the process is the issuance of a notice from the IRS to the taxpayer, detailing the amount of federal tax debt owed, including any associated penalties and interest. This notice serves as an essential communication channel between the IRS and the taxpayer, alerting them to the debt and its implications.
- Notice of Intent to Levy: If the taxpayer does not respond to the initial notice or fails to make arrangements to address the tax debt, the IRS issues a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” This notice explicitly informs the taxpayer of the IRS’s intention to levy their assets, which includes their bank accounts. It is important to take prompt action upon receiving this notice to explore potential avenues for resolution.
- Collection Due Process (CDP) Hearing: The taxpayer has the right to request a Collection Due Process (CDP) hearing within 30 days of receiving the Notice of Intent to Levy. This hearing offers an opportunity for the taxpayer to engage with an IRS appeals officer and discuss potential options for resolving the tax debt before the IRS initiates any collection actions.
- Bank Levy: Should the taxpayer not request a CDP hearing or fail to reach an agreement with the IRS during the hearing, and if the unpaid tax debt persists, the IRS can proceed with a bank levy. The IRS contacts the taxpayer’s bank and issues instructions to freeze the funds in their account, up to the total amount of the tax debt. The bank is then required to hold these funds for a period of 21 days before forwarding them to the IRS.
It’s important to note that while the IRS holds the authority to execute a bank levy, certain exemptions and safeguards are in place to ensure that individuals have access to a minimum amount of funds to cover essential living expenses.
In most situations, a debt collector cannot take money from your bank account without authorization in Texas. However, you may not receive a notification straight away that a bank levy has been placed on your account. Often, people discover they have a levied account when they go to take money from their account and it is frozen.
This is because debt collectors are afraid the debtor will move the money out of their account before it can be taken. You will usually receive notification of the garnishment after your bank account has been frozen or if you contact your financial institution to figure out why your personal or business account is frozen.
A debt collector is required to send you a debt validation letter once they notify you of the debt. You then have a limited time to address the debt by contacting the debt collector and beginning repayment. If you do not address the debt within this time, they can sue you or your bank to garnish your account.
Because of this, it is important to respond promptly to any notification from a debt collector about an unpaid debt. If you do not take legal action to secure your assets, your bank accounts could be frozen without notification and a levy could be placed on your account.
Federal Debt
The exception to this rule is federal debt. If you owe money to the federal government, a government agency, or a federal debt collector, they can garnish bank accounts without authorization. If you owe unpaid child support, spousal support, or a federal student loan, the government may place a levy on your bank account without a court order.
With federal debt, the risks are high because debtors have fewer protections under the law. If you receive notification of unpaid federal debt, a Texas debt attorney can help you set up a payment plan and assess whether you can settle your debt for less than you owe. If you cannot pay your debt, you may be eligible for Currently Not Collectible (CNC) status or an Offer in Compromise.
Limits on a Bank Levy in Texas
Bank levy limits for unpaid federal taxes are governed by federal law, and these limits are not specific to individual states like Texas. However, there are certain exemptions and protections in place to ensure that you have access to a minimum amount of funds for basic living expenses. These protections are outlined in the federal law and apply regardless of the state you reside in. Here’s an overview of the key points to understand about bank levy limits:
- Federal Exemptions: Federal law provides exemptions that protect specific types of income from being levied by the IRS. These exemptions include certain federal benefits and payments, such as Social Security benefits, Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), veterans’ benefits, federal retirement benefits, and certain other government benefits.
- Standard Deduction and Allowable Exemptions: For funds in your bank account that are not covered by federal exemptions, the IRS uses a formula to calculate the amount that is exempt from being levied. This formula takes into consideration the standard deduction and the number of allowable exemptions you are eligible for based on your filing status. The exempt amount is meant to protect a minimum amount of funds for your essential living expenses.
- Notice and Opportunity to Appeal: Before initiating a bank levy, the IRS is required to provide you with notices outlining the tax debt, their intent to levy, and your right to appeal the levy through a Collection Due Process (CDP) hearing. This hearing allows you to present your case and explore possible resolutions with the IRS appeals officer.
- Financial Hardship Considerations: If a bank levy would result in financial hardship, you can present your case during the CDP hearing to request that the levy be released. The IRS may consider factors such as your income, necessary living expenses, and other financial circumstances when deciding whether to release the levy.
It’s important to note that tax laws and regulations can change, and it’s advisable to consult with a Texas tax attorney who is knowledgeable about the most current information. They can guide you through the specifics of bank levy limits, exemptions, and protections that apply to your situation. If you’re facing the possibility of a bank levy due to unpaid federal taxes, seeking professional advice can help you understand your rights and explore potential avenues for resolution.
Laws on Wage Garnishment in Texas
Similar to bank account garnishment, wage garnishment is when your incoming wages are used to pay back a debt. Wage garnishments happen before your wages go into your bank account. Your employer receives the notification of wage garnishment and they must follow the court order by taking money from your paycheck to pay back your unpaid debts.
In most situations, a creditor must notify you before garnishing your wages for unpaid debts. However, the IRS and some tax collection agencies may garnish your wages without notifying you. You should know of unpaid taxes or the original debt through mail notifications and warning letters. However, if you are unaware that you owed a debt and they begin to garnish your wages, contact a tax attorney immediately.
Although there are no limits on the amount of money creditors can take from your wages, they typically base their amount on the number of dependents that you have and your tax deduction rate.
Federal Tax Garnishment in Texas
If you owe unpaid federal taxes and the IRS determines that you have not made arrangements to pay your debt, they can take various actions to collect, including wage garnishment. Federal tax garnishment limits the amount of your wages that can be taken to satisfy the debt. The IRS follows a specific formula to determine the exempt amount, which depends on your filing status, number of exemptions, and your standard deduction.
Texas Garnishment Laws
Texas has laws in place that restrict wage garnishment for certain types of debts, including consumer debts like credit card debt and medical bills. However, these restrictions generally do not apply to debts owed to the government, such as unpaid taxes. Federal law, in most cases, supersedes state law when it comes to wage garnishment for federal debts, including federal tax debts.
Statute of Limitations on Bank Account Garnishment Texas
There is a statute of limitations on all debts owed in Texas. Creditors have four years to sue debtors for unpaid debts. Once this period has passed, they cannot legally sue you for the money that you owe. This means that they cannot garnish your bank accounts if the debt is older than four years.
Because debt collectors must file a lawsuit against a debtor for bank account garnishment, they cannot legally do this after four years and cannot threaten debtors with bank account garnishment after this time period. If they sue you to recover the debt after four years, you can use the statute of limitations as a defense strategy to avoid your accounts being garnished.
Fighting Against IRS Debt Collection in Texas
The prospect of having your bank accounts garnished because of unpaid debts is quite scary. Dealing with debt collectors can be extremely difficult, particularly if you are in financial hardship and have no knowledge of debt collection laws in Texas. The best way to fight against the practices of debt collectors is to hire an experienced tax attorney. If you owe a federal debt, they can assess whether you are entitled to federal relief or a reduction of your debt.
If your account has already been frozen because of unpaid debt, the first thing to do is contact your bank and find out why. If there is a judgment against you, you have a short time period to fight against the garnishment in court. An attorney can help you fight against it by challenging the debt and debt collector practices in court.
If you have personal assets that should be protected, like your primary residence and certain personal property, your attorney can submit a Protected Property Claim Form on your behalf. This will ensure that you do not lose access to personal assets and property because of unpaid commercial debts.
Contact Ronald Arthur Stearns Sr. PLLC Today!
Bank account garnishments cause significant financial strain for people with unpaid debts. When you go to an ATM one day and cannot withdraw money because your account has been frozen, it is extremely overwhelming. A debt collector cannot take money from your bank account without authorization. However, you may not receive notification of bank levies until after your account has been frozen.
Therefore, contacting a tax attorney as soon as you receive notification of debt is vital. The best way to avoid your bank account from being garnished is by dealing with the unpaid debt immediately. If you are in a difficult financial situation and cannot currently pay back the debt, an attorney can help you set up a fair payment plan and protect your personal property.
Ronald Arthur Stearns Sr. PLLC has spent over 26 years fighting for the rights of Texas taxpayers. Throughout his many years of practice as a tax attorney, he has gained a notable reputation for being an aggressive attorney. He understands the financial challenges faced by ordinary taxpayers and he wants to do everything he can to protect them.
Ronald Arthur Stearns Sr. has an A+ Better Business Bureau Rating (BBB) and has been recognized by the State Bar of Texas and the American Bar Association. His unique experience and skills are what you need to protect your assets against the tough practices of debt collectors.
Call our law firm at 210-853-2135 to schedule a consultation with a Texas debt collection attorney today!