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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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How can I recover funds from an account, a creditor has put levy on?

Resolved Question:

My bank account was levied by a creditor in Pennsylvania. I have a court date on 1/24 to challenge the levy. My bankruptcy will be filed more than 20 days after the date of the bank levy, so I understand that debt cannot be discharged with the bankruptcy filing. I have two questions 1) Does my bank have to wait until after the hearing to release the funds to the creditor or can they release those funds to the creditor at any time? 2) I'm going to be arguing that my account is not eligible for levy but I'm guessing the judge will care less about what I have to say and uphold the levy. Is there anything I can do to recover the funds in that levied account in Pennsylvania?

Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 3 years ago.

If the funds in your bank account are subject to a Bankruptcy exemption, the account can be released to you.
Are the funds in your bank account exempt?

Customer: replied 3 years ago.

I've almost gone blind reading all the PA regulations regarding bank levy for collections and in my opinion, the account in its entirety is not eligible for levy but many other people have disagreed with me, including my bank. The account includes funds that are the result of recurring direct deposits. Those direct deposits are my bi-weekly pay from my employer. Based on the changes that were made to PA law in 2010, personal income is exempted. However, people keep telling me that only social security, disability, and retirement pay is exempted. Is my regular bi-weekly pay exempt therefore making the entire account exempt from levy?

Expert:  cfortunato replied 3 years ago.

Wages cannot be garnished in Pennsylvania, but there is no protection for money in a bank account, even if the money is from your employer.

However, the money may be exempt because of an applicable Bankruptcy exemption:

1) Did you use the state or the federal exemptions?

2) If you used the federal exemptions, how much of the homestead exemption did you need to use for your home or for other assets?

3) How much money is in your bank account?

Customer: replied 3 years ago.
There's $2500 in the account. I was not aware of the Homestead Exemption. What is that? How do I claim that?
Expert:  cfortunato replied 3 years ago.

The homestead exemption is the exemption for your home, if you own your home.

1) Do you own your home?

2) If yes, what is the current market value of your home?

3) If yes, what is the balance on the mortgage?

The homestead exemption amounts are different if you use the state exemptions

than if you use the federal exemptions.

4) Which set of exemptions did you use - state or federal?

Customer: replied 3 years ago.

None of this was mentioned in the Writ Of Execution I received. Is this Homestead Exemption only available as part of a bankruptcy? My bankruptcy has not been filed yet. I've only requested a hearing for the bank levy. How do I claim this Homestead Exemption? I do own a house. The true market value is about $275,000 and the mortgage balance is $269,000.

Expert:  cfortunato replied 3 years ago.

The homestead exemption is a federal Bankruptcy exemption, so is only available if you file a Bankruptcy. The exemption amount is $21,625, and you can use up to $10,825 of that amount for any other property, including your bank account.
This means if you file a Bankruptcy before the money in your bank account is released to the judgement creditor, which takes around 30 days, the bank will not be allowed to release those funds to the judgement creditor.
However, if you file your Bankruptcy after the funds are released to the creditor, you may not be able to get your money back.

I think this is what you wanted to know. If not, please let me know.
Thank you.

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
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