Bank Levies – Now More Effective and Less Expensive

A bank levy allows the creditor to “sweep” the funds in a debtor’s account.  To levy a debtor’s account, a creditor was typically forced to serve a Notice of Levy on the exact bank branch where the debtor’s account was located.  The bank levy would have no effect on funds held at the same bank but a different branch.  This made life difficult for creditors.  Not only did creditors need to know the debtor’s bank, but also the exact location/address at which the debtor opened the bank account.  Acquiring this level of detail can be difficult and expensive.  It can be accomplished via a judgment debtor examination, but those are often expensive and time consuming.

However, as of January 1, 2013, bank levies are far more effective and less costly.  A new law, California Assembly Bill 2364, requires financial institutions to designate a central address for service of Notices of Levy.  Service of a Notice of Levy on a financial institution’s central address now serves to sweep all of a debtor’s funds at any branch throughout California.  In other words, there is no longer a need to identify the specific branch/address at which the debtor’s account was opened.

AB 2364 is a critical change for several reasons.  First, to levy a bank account, a creditor must first obtain a writ of execution from the court to be used in each county in which the levy will take place.  Under prior law, a creditor was typically required to obtain multiple writs of execution for use in multiple counties, and go through the same levy steps in multiple counties (e.g., process servers, sheriff instructions, etc.).  These extra steps significantly increased costs and prevented creditors from levying on certain accounts.  That has changed as a result of AB 2364.  Most of the large banks have designated central addresses in Los Angeles County.  This allows creditors to levy on many banks simultaneously by obtaining a single writ of execution (in LA County) and using only one process server.

In addition, because of the recent economic downturn, several smaller banks no longer exist, meaning debtors are more likely to maintain accounts at one of the largest banks (e.g., Bank of America, Chase, Wells Fargo).  This allows creditors to cost-effectively serve a levy on each of the big banks without first having to pay for an asset search or debtor’s examination.  Prior to AB2364, creditors would typically levy only on accounts they knew about.  Now, it is inexpensive to levy on many of the big banks, hoping that the debtor maintains one or more accounts with at least one of them.  The odds are in the creditor’s favor.  The three largest banks in California collectively hold more than 52% of all funds on deposit in California.