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Why Bank Levies Fail
What if you know for sure where a judgment debtor banks, then pay a Sheriff to levy their bank account, and the bank responds with "no funds" or "account closed"?
In some places, bank levies are expensive, with the costs of finding the bank account, paying the court, the Sheriff, and a process server.
Getting a "no funds" or "account closed" letter can be frustrating. There are usually six reasons for this result, in order of probability:
1) The judgment debtor is poor, or closed their bank account.
2) Either you, or your information source was wrong, and the judgment debtor never had a bank account at that bank, or at that branch.
3) The Sheriff, you, or someone else, made an error or a typographical error that caused the levy to fail. When a bank is served, make sure the person who is served is authorized to accept service. When your process server serves an employer, where they sign, it should read something like MoneyBags Bank, by serving Sally Serveme, manager, authorized to accept service. In California this would be covered by CCP 416.10.
4) The debtor uses an AKA, or is only an authorized signer on the bank account, and has no ownership of the money. It may be a typo or a name problem. The account may be in the name of an LLC or trust. So, word your levy in a manner that might capture all of their accounts, for example "Any and all accounts standing in the name of or for the benefit of Dan Debtor, SS# 123-45-7689, including but not limited to account number 10000-00000".
5) The bank made a mistake.
6) The bank is lying or is protecting the judgment debtor. You might need to challenge them if you know what was in the judgment debtor's account at the time of your levy.
The most common reasons are the judgment debtor either never had an account, closed their account, is only a signer on the account, or uses an AKA name.
When your judgment debtor is poor, bank levy results will rarely cover the money you spent.
At judgment debtor examinations, when you ask judgment debtors where they bank, many will lie. Even when you know for sure where a judgment debtor banks, some judgment debtors change banks accounts as often as most people change their socks.
There are many laws that protect everyone's private banking information, including judgment debtors. Very few methods of locating a bank account are perfect. Many bank location services use historical records, that are not completely current or accurate, especially with poor or clever judgment debtors.
If the judgment debtor uses an AKA, you might need to get an affidavit of identity approved by the court, with proof that links the judgment debtor with the names they actively use or have their bank account in.
When the judgment debtor owns a DBA business, to get an affidavit of identity approved by the court, you will need a certified copy of their fictitious name statement filing.
Bank accounts have owner(s). There may also be authorized signers, or benefactors that inherit the funds upon death of the owner(s).
Sometimes "no funds" means the judgment debtor is only an authorized signer on the bank account. That means the judgment debtor is only linked to the account, and has no ownership of the money that could be reached by a levy.
Some people open bank accounts for their children, under The Uniform Transfers to Minors Act. Some use their child's account as their personal checking account that is off-limits to creditors, because they do not own the account.
Some people get ripped off, after they add a new authorized signer to their bank account. Laws can punish people who make mistakes as much as the crooks who defrauded them.
For example, a man meets a new girlfriend that moves in with him. Later, he adds her as an authorized signer on his checking account. She then deposits $15,000 in forged checks, and when the 3-day hold is over, she withdraws all the money, and absconds to an unknown location.
Within a few weeks, the checks are returned as forgeries, and are charged back to the owner's account. Perhaps unfairly, the owner of the account is now responsible for repaying the bounced checks.
The criminal that bounced checks and stole the money is not going to be charged and made to repay, unless they can be found, and the charges are proven in court, and if they still have availably assets that might eventually be recovered.
Sometimes banks made mistakes. More than once a bank has lied, tipped off, or in some other way protected the funds of a judgment debtor.
If you are confident you know the right bank for the judgment debtor, and that money was in the account at the time of the levy; you might schedule, subpoena, and serve a judgment debtor for an examination at the court. This would be for situations where you suspect a lot of money was at the bank at the time of the levy when they say "no accounts found" or when the amount in the debtor's bank account was for a trivial amount when the debtor seems rich.
A subpoenaed request for the production of documents is known in some courts as a Subpoena Duces Tecum (SDT). SDTs served on banks should be worded to include any and all accounts associated with the judgment debtor. Sometimes a new lawsuit is required where discovery could subpoena records before and after a levy was done to see where and when money was transferred. In California, such a lawsuit can be done in small claims court.
You can subpoena a request for the production of documents, from both the judgment debtor and their bank as a third-party. From the bank, you can request a copy of the documentation served by the Sheriff.
One goal can be to get both the bank and the judgment debtor in court at the same time to answer questions and produce documents. It is difficult for two parties to lie exactly the same way.
You could request a year's worth of records. You might find records for an account that "did not exist". In California, and probably other states, if the debtor is a person, one needs to first serve them a "notice to the consumer".
If the judgment debtor does not show up, you can keep trying to recover the judgment. If the bank does not show up, you might be able to sue them, when local laws (in California, CCP 1992 allows this).
If you can prove the bank had funds in the name of the judgment debtor at the time your levy was served, you could start by writing a demand letter to the bank, politely demanding the balance in the account on the levy date, up to the amount required to satisfy the judgment. Include the proof you knew the bank account existed, the Sheriff's documentation, and the bank's memorandum of garnishee, that shows their previous statement of "no accounts".
Some banks pay after getting a polite demand letter, other banks you will have to sue. In these kinds of circumstances, many times the bank or credit union will settle a lawsuit before the trial. Sometimes the bank will spend $20K on lawyers to fight you than simply pay the $5,000 owed.
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