Toolkit · Consumer Protection

The Exemption Claim, Bank Levy Response, and Garnishment Calculation Toolkit

15 U.S.C. § 1692

Type
Toolkit
Jurisdiction
National
Date
2024-12-14
Topic
Consumer Protection

This toolkit supplies the working documents for responding to a garnishment or a bank levy. It opens with a deposit source ledger, because the entire exemption case is a bookkeeping exercise, and an automatic protection demand letter that frequently frees federal benefit funds the same day without any court filing. It provides an exemption claim template, a head of household affidavit, and a disposable earnings calculator that catches the two errors employers make most often. It includes a creditor release letter that resolves a meaningful share of matters within a week, an employer answer checklist covering the liability that falls on a party owing nothing, a tax levy exemption statement worksheet, a motion to vacate a default judgment, a separate account plan that prevents recurrence, and an authority reference sheet.

The Exemption Claim, Bank Levy Response, and Garnishment Calculation Toolkit

Consumer Protection > Wage Garnishment, Bank Levies, and Exempt Funds | Published 14 December 2024 - Updated 28 April 2025 | UpLaw - uplaw.us

How to use this toolkit

Tools 1 and 2 are day one. Tools 3 through 5 obtain release. Tools 6 and 7 handle wages and employers. Tools 8 through 10 handle federal collection and the judgment. Tools 11 and 12 prevent recurrence. Tool 13 is the authority.

⚠️ Tools 1 and 2 together resolve more of these matters than everything else combined, and both are free.

Tool 1 — Deposit source ledger

Account holder ______ Bank ______ Account ending ______ Date of freeze ______ Balance frozen ______

Date Deposit description Amount Source Exempt? Statute Direct deposit?

Withdrawal record

Date Description Amount Running balance

Summary

  • Total exempt deposits in the ninety days: ______
  • Total exempt deposits in the two months preceding the order: ______
  • Lowest intermediate balance between the first exempt deposit and the freeze: ______
  • Non-exempt deposits: ______
  • Amount claimed as exempt: ______

☐ Ninety days of statements attached ☐ Benefit award letters attached ☐ ☐ Tracing method identified: lowest intermediate balance ☐ first in, first out ☐ pro rata ☐ direct ☐ ☐ ⚠️ A one-page ledger with statements attached persuades where legal argument alone does not, because the court's question is factual ☐

Tool 2 — Automatic protection demand letter

To: [bank] — Legal Order Processing Re: Account ending ______ — Garnishment served ______

This account receives directly deposited federal benefit payments. Under 31 C.F.R. Part 212, upon receipt of a garnishment order you were required to:

  1. Perform a two-month look-back from the date you received the order;
  2. Identify federal benefit payments deposited electronically during that period;
  3. Calculate a protected amount equal to the lesser of those payments or the balance on the review date;
  4. Make that amount available immediately, without any claim, court order, or creditor consent;
  5. Send the account holder a notice of what was protected; and
  6. Refrain from charging a garnishment fee against protected funds.

Deposits during the look-back period were: ______ (statements attached).

Protected amount: $______. Please confirm within one business day that this amount is available, and refund any garnishment fee charged against it.

☐ Sent to the bank's legal order processing unit, not a branch ☐ ☐ Statements attached showing the direct deposits ☐ ☐ Escalated to the bank's compliance function if not resolved same day ☐ ☐ ⚠️ This is automatic. No form, no hearing, no deadline. If the bank did not do it, saying so precisely frees the money without any filing. ☐

Tool 3 — Exemption claim template

CLAIM OF EXEMPTION Court ______ Case No. ______ Judgment creditor ______ Judgment debtor ______ Property levied: funds in account ending ______ at ______, frozen on , in the amount of $.

1. The funds are exempt. The funds consist of ______ [Social Security / Supplemental Security Income / veterans benefits / civil service retirement / railroad retirement / wages / public assistance / other], which are exempt under ______ [statute].

2. Source of every deposit. See the attached ledger and ninety days of account statements. The exempt deposits total $______, made on ______.

3. Tracing. The lowest balance in the account between the first exempt deposit and the freeze was $. Under the lowest intermediate balance approach, $ of the frozen funds are exempt.

4. Head of household. [If applicable:] The debtor provides more than half the support of ______ dependents, as shown by the attached affidavit and supporting documents.

5. Automatic protection. [If applicable:] The bank was required by 31 C.F.R. Part 212 to protect $______ without any claim.

6. Hardship. The debtor's monthly income is $______ and monthly obligations are $______. Without release the debtor cannot pay ______.

Relief requested: an order declaring $______ exempt, directing release, and awarding costs.

Expedited hearing requested because ______.

☐ Filed within the deadline ☐ Date filed ______ ☐ Ledger, statements, and award letters attached ☐ ☐ Copy served on the creditor's counsel and the bank ☐ ☐ Expedited hearing requested ☐

Tool 4 — Head of household affidavit

AFFIDAVIT IN SUPPORT OF HEAD OF HOUSEHOLD EXEMPTION

  1. I am ______, the judgment debtor.
  2. I provide more than one-half of the support for the following persons: ______ [name, relationship, age for each].
  3. My gross monthly earnings are $. My net earnings after legally required deductions are $.
  4. The household's monthly expenses are: housing $______ utilities $______ food $______ transportation $______ medical $______ childcare $______ other $______.
  5. No other person contributes more than ______ percent of the household's support.
  6. Attached are: ______ [pay stubs, tax return showing dependents, birth certificates, school records, lease, benefit letters].

☐ Signed and notarized where required ☐ ☐ Supporting documents attached rather than described ☐ ☐ ⚠️ This is the most valuable state protection in the field and is claimed far less often than it applies ☐

Tool 5 — Creditor release letter

To: Counsel for [creditor] Re: [case], levy on account ending ______

The funds frozen on ______ consist entirely of [exempt source], as shown by the attached ninety days of statements and benefit award letters. The exempt amount is $______.

Under ______ [statute], these funds are not subject to execution. Under 31 C.F.R. Part 212, $______ was required to be protected automatically.

We request that you consent in writing to release of the levy by ______. If you do not, we will file a claim of exemption and request an expedited hearing, and will seek costs.

We note that continued collection efforts directed at funds you know to be exempt may implicate 15 U.S.C. § 1692e and 15 U.S.C. § 1692f.

☐ Sent with the ledger and statements ☐ Response deadline stated ☐ ☐ ⚠️ Pursuing exempt funds is unprofitable, and a creditor's counsel who receives the statements usually releases rather than litigate. ☐ Follow-up call placed the day after the deadline ☐

Tool 6 — Disposable earnings calculator

Line Amount
Gross earnings for the pay period
Less federal income tax withheld
Less state and local income tax withheld
Less Social Security and Medicare
Less other deductions required by law
= Disposable earnings
Twenty-five percent of disposable earnings (A)
Thirty times the federal minimum hourly wage, for this pay period (B)
Disposable earnings minus (B) = (C)
Maximum garnishable = lesser of (A) and (C)
Amount actually withheld
Difference

☐ ⚠️ Do NOT deduct before the calculation: voluntary retirement contributions ☐ health or life insurance premiums ☐ union dues ☐ charitable deductions ☐ loan repayments ☐ ☐ ⚠️ Do NOT apply the percentage to gross pay ☐ ☐ State protection compared and the more favorable applied — 15 U.S.C. § 1677 ☐ ☐ Support orders use a different, higher percentage ☐ ☐ Multiple orders: priority determined, aggregate cap still applied ☐ ☐ Authorities — 15 U.S.C. § 1671, 15 U.S.C. § 1673, 29 C.F.R. Part 870 ☐

Tool 7 — Employer answer checklist

☐ Answer filed within the deadline ☐ Date ______ ⚠️ Failure can make the employer liable for the entire judgment in many states. ☐ Employment status stated accurately ☐ Pay frequency ☐ Next pay date ☐ ☐ Existing orders disclosed with their dates of service ☐ ☐ Disposable earnings calculated using Tool 6 ☐ ☐ Correct cap applied for this order type: ordinary creditor ☐ support ☐ tax levy ☐ student loan ☐ ☐ Priority determined among competing orders ☐ Aggregate cap observed ☐ ☐ Employee given a copy of the order where the state requires ☐ ☐ Confidentiality maintained; disclosure limited to what the process requires ☐ ☐ ⚠️ No adverse action for a single garnishment — 15 U.S.C. § 1674 ☐ State extension checked ☐ ☐ Withholding stopped promptly on satisfaction or release ☐ Over-withheld amounts refunded ☐ ☐ Records retained ☐ Payroll system flagged so withholding does not continue past the order ☐

Tool 8 — Federal collection response sheet

Program Authority What to check Deadline
Administrative offset 31 U.S.C. § 3716, 31 C.F.R. Part 285 Notice received? Debt verified? Hardship request available?
Administrative wage garnishment 31 U.S.C. § 3720D Hearing requested in time? Financial hardship documented? ⚠️
Student loans 20 U.S.C. § 1095a, 34 C.F.R. Part 682 Rehabilitation or consolidation available? Hearing request filed? ⚠️
Child support 42 U.S.C. § 666, 42 U.S.C. § 659 Order current? Modification warranted? Arrears verified?
Tax levy 26 U.S.C. § 6331, 26 U.S.C. § 6334, 26 C.F.R. Part 301 ⚠️ Exemption statement returned? Collection alternatives? ⚠️
Federal employee garnishment 5 C.F.R. Part 550 Correct cap applied?

☐ ⚠️ A levied taxpayer who does not return the exemption statement is exempted at the lowest possible amount ☐ Return it today ☐ ☐ Collection alternatives evaluated: installment agreement ☐ offer in compromise ☐ currently not collectible ☐ hardship release ☐

Tool 9 — Motion to vacate a default judgment

MOTION TO VACATE JUDGMENT AND QUASH GARNISHMENT

1. The judgment. Entered ______ by default in favor of ______ in the amount of $______.

2. Service was defective. [Describe: wrong address, no personal service, substituted service on a person not residing there, return of service inconsistent with the facts. Attach the return of service and the debtor's affidavit.]

3. Meritorious defense. [Statute of limitations; lack of standing and absence of proof of the assignment chain; payment; identity theft; incorrect amount; prior discharge.]

4. Diligence. The debtor learned of the judgment on ______, when the account was frozen, and moved promptly.

5. Relief. Vacate the judgment, quash the garnishment, and order release of the frozen funds.

☐ Return of service obtained from the court file ☐ Compared to the debtor's residence history ☐ ☐ Assignment chain demanded from the creditor ☐ ☐ Statute of limitations analyzed from the accrual date ☐ Any revival examined ☐ ☐ Prior satisfaction, settlement, or discharge searched ☐ ☐ ⚠️ This resolves the problem permanently rather than one levy at a time ☐

Tool 10 — Obligation triage sheet

Obligation Holder Balance Monthly Enforcement risk Priority
Child support Withholding, license, passport, intercept 1
Obligation carrying incarceration or license risk 2
Tax levy Levy without judgment 3
Student loans Administrative garnishment
Judgment creditors Garnishment, levy
Total required
Actual capacity
Gap

☐ Bankruptcy evaluated where the gap is structural — 11 U.S.C. § 362, 11 U.S.C. § 522 ☐ ☐ Retirement protections noted — 29 U.S.C. § 1056, Patterson v. Shumate, Rousey v. Jacoway ☐ ☐ Schedule drafting precision noted — Taylor v. Freeland & Kronz, Schwab v. Reilly ☐ ☐ Written plan given to the client ☐

Tool 11 — Separate account plan

☐ Open one account for exempt income only ☐ Bank ______ Account ______ ☐ Direct deposit established for every benefit payment ☐ ⚠️ The automatic protection reaches only electronic deposits. ☐ Nothing else deposited into it — no tax refund ☐ no spouse's pay ☐ no gifts ☐ no business receipts ☐ ☐ A second account used for everything else ☐ ☐ No adult child added as a joint holder ☐ Power of attorney used instead ☐ ☐ Address updated with the bank, every court, every creditor, and every agency ☐ ☐ Statements retained for at least ninety days at all times ☐ ☐ Benefit award letters kept with the statements ☐ ☐ Client given a written card stating: "Federal benefits are directly deposited into this account. Under 31 C.F.R. Part 212 you must protect two months of those deposits automatically." ☐ ☐ ⚠️ This single structure converts every future dispute from a tracing exercise into a one-page showing ☐

Tool 12 — Bank and collector conduct log

Date Actor Conduct Why it may violate Evidence
Bank Froze more than the order required Deposit agreement, state law
Bank Failed to perform the two-month look-back 31 C.F.R. Part 212
Bank Charged a garnishment fee against protected funds 31 C.F.R. Part 212
Bank Refused release after exemption allowed Court order
Collector Threatened garnishment without a judgment 15 U.S.C. § 1692e
Collector Misstated the amount subject to garnishment 15 U.S.C. § 1692e
Collector Continued collection after notice of exemption 15 U.S.C. § 1692f
Collector Improper employer contact 15 U.S.C. § 1692

☐ Related payment rules where applicable — 12 C.F.R. Part 1006 ☐ ☐ Recordings, letters, and call logs preserved ☐ ☐ Fee-shifting claims evaluated where amounts are small ☐

Tool 13 — Authority reference sheet

Wages

Exempt income

Account protection

Federal collection

Bankruptcy

Due process and conduct

Tool 14 — Day-one action card

Print this. It is what a client or an intake worker needs in the first hour.

☐ 1. Get ninety days of statements. Online, printed, or from a branch. Nothing else can be done without them. ☐ 2. Ask one question: are federal benefits directly deposited into this account? If yes, go to Tool 2 immediately — part of the money should never have been frozen and no filing is required. ☐ 3. Find the notice. It states the deadline. If no notice arrived, call the clerk with the case number and ask when the claim is due. ☐ 4. Write the deadline on the file in red. ☐ 5. Handle the emergency. Rent, utilities, medication, and the payments that will bounce. Notify each in writing today. ☐ 6. Ask the bank to reverse overdraft fees caused by the freeze. ☐ 7. Send the creditor's counsel the statements with a one-paragraph letter. ☐ 8. Prepare the ledger using Tool 1. ☐ 9. File the claim using Tool 3, with an expedited hearing request. ☐ 10. Before the client leaves, set up the separate account using Tool 11.

⚠️ Steps one, two, and seven are free, take under two hours, and resolve more of these matters than everything else on this list.

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