Can a Company Take Money From Your Bank Account?

A company can take money from your bank account only if one of four things is true: you authorized the withdrawal, the bank itself is owed the money and exercises its right of setoff, a court has issued a garnishment order, or a federal statute lets a government agency levy the account directly. Anything outside those four categories is an unauthorized transfer, and federal law gives you a way to claw the money back if you move quickly.

Each path has its own rules, its own warning signs, and its own deadlines for pushing back. Knowing which one you’re dealing with is the first step.

Payments You Already Authorized

Most money that leaves your account at a company’s request leaves because you said it could. Giving a mortgage servicer, a utility, or a subscription service your account and routing numbers authorizes recurring debits through the Automated Clearing House system. Federal rules require that authorization to be in writing or similarly authenticated, and the company has to give you a copy.¹

You can revoke that permission at any time. Tell the company in writing that the authorization is canceled, then place a stop payment order with your bank at least three business days before the next scheduled debit.² A bank may take the stop payment request by phone, but it can require written confirmation within 14 days, and an oral request expires if you don’t follow up.¹ Banks commonly charge $30 to $40 per stop payment order.

Your Bank’s Right of Setoff

If you owe money to the bank where you keep your checking or savings, that bank can take funds from your deposit to cover the overdue debt without filing a lawsuit. This is the right of setoff, and the account agreement you signed when opening the account establishes it. A bank that also holds your auto loan, for example, can pull from checking if you fall behind.

Setoff only reaches within the same institution. Your bank cannot grab your deposits to pay a loan held by a different lender. And there is one exception many people miss: federal law prohibits a credit card issuer from using setoff to collect credit card debt from your deposit account at the same bank.³ The bank can still pursue collection through other legal channels, but it cannot help itself to your checking balance to pay the card.

Court-Ordered Garnishments

Outside creditors (medical providers, credit card issuers you don’t bank with, debt collectors) cannot touch your account without going through court first. The creditor has to file a lawsuit, serve you with notice, win a money judgment, and then request a garnishment order (sometimes called a bank levy or writ of garnishment) directing your bank to freeze and turn over funds.⁴

Once the bank receives the order, it freezes funds up to the judgment amount. You get notice of the lawsuit itself, but the freeze on your account can hit before you learn about the garnishment step, which is why an unexpected zero balance is sometimes the first real warning. Banks also charge a processing fee for handling garnishment orders, typically $75 to $125, and that fee comes out of your account whether or not funds are ultimately taken.

Many states exempt a minimum balance from garnishment regardless of where the money came from. These exemptions vary widely. Roughly a third of states offer some automatic protection; many others protect nothing beyond federally exempt benefits. Check the rule in your state, because the protections are not uniform.

Government Levies Without a Court Order

Some government agencies can skip the courts and levy your account under their own administrative authority. The two most common sources are unpaid federal taxes and defaulted federal student loans.

IRS Tax Levies

The IRS can seize funds from a bank account for unpaid federal taxes after sending written notice at least 30 days in advance.⁵ In practice, the IRS sends several notices before it gets there, culminating in a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.”⁶ That final notice gives you the right to request a Collection Due Process hearing before anything is seized.

When the IRS does levy, your bank has to hold the frozen funds for 21 calendar days before sending the money over.⁷ That window exists so you can contact the IRS, correct errors, or arrange a payment plan. You can’t withdraw the frozen funds during those 21 days, but if you resolve the issue in time, the IRS can release the levy before the money leaves the bank.⁸ Twenty-one days goes fast.

Federal Student Loans and State Taxes

For defaulted federal student loans, the Department of Education can garnish wages up to 15% of disposable pay without a court order, provided it gives at least 30 days’ written notice and an opportunity for a hearing.⁹ It can also intercept your federal tax refund through the Treasury Offset Program with at least 60 days’ notice.¹⁰ Collection activity on these loans resumed in 2025 after the pandemic-era pause.¹¹ State tax authorities generally have similar administrative powers to collect unpaid state taxes through bank levies.

Money That Cannot Be Taken

Even with a valid garnishment order in hand, certain funds in your account are off limits. Protected benefits include:

Social Security retirement and disability benefits
Supplemental Security Income (SSI)
Veterans’ benefits
Federal employee retirement payments under CSRS and FERS
Railroad retirement and unemployment benefits

When these benefits arrive by direct deposit, banks have to protect them automatically. On receiving a garnishment order, the bank looks back two months, totals the federal benefits direct-deposited during that window, and shields that amount (or the current balance, whichever is less) from the freeze. The bank also cannot charge a garnishment processing fee against the protected amount.¹²

What if the same account holds benefits and other income? The protected amount is calculated from direct-deposited federal benefits regardless of what else sits in the account.¹² Anything above that is treated like ordinary money and can be frozen. If you receive $1,500 a month in Social Security and the account also carries $2,000 from freelance work, the benefit amount is protected and the rest is fair game. Keeping exempt benefits in a separate account doesn’t change the legal calculation, but it does make disputes simpler if something goes wrong.

Joint Accounts Create Extra Risk

A garnishment on a joint account can freeze the whole balance in many states, even if most of the money belongs to the co-owner who doesn’t owe the debt. State rules differ. Some limit the creditor to roughly half. Some protect accounts held by married couples as tenants by the entirety. Community property states have their own framework. The same risk applies to IRS levies on accounts where the debtor is only a signatory: if the IRS levies an account you share with, say, an elderly parent, the actual owner of the funds can contact the IRS and provide proof (bank statements, deposit records) showing where the money came from.⁸ If you’ve been added to someone else’s account for convenience, both of you should understand what that exposure looks like.

How to Fight Back

A frozen account is alarming, but you have options and tight deadlines.

Claim an Exemption

If the frozen funds come from an exempt source (Social Security, veterans’ benefits, or other protected income), file a claim of exemption with the court that issued the garnishment. The garnishment notice should explain how to file and the deadline, which is usually short and strictly enforced. Gather deposit records tracing the money to its exempt source. If the creditor contests the claim, the court will set a hearing. Show up or you’ll lose.

Attack the Underlying Judgment

Sometimes a garnishment grows out of a default judgment you never knew about. Maybe you weren’t properly served. Maybe you were hospitalized. You can file a motion to vacate the judgment, and courts generally require both a valid reason for not responding and a legitimate defense to the debt itself. Improper service, fraud by the creditor, and genuine emergencies are recognized grounds in most jurisdictions.

Use the IRS 21-Day Window

For IRS levies, the 21-day holding period is the moment to act. Call the number on the levy notice. Options include setting up an installment agreement, demonstrating economic hardship, or pointing out errors in the amount owed. If you received the Final Notice of Intent to Levy and didn’t request a hearing at that stage, you may still be able to request an equivalent hearing after the levy issues, though your rights narrow the longer you wait.

When the Withdrawal Was Not Authorized

If money leaves your account with no authorization behind it (no ACH agreement, no court order, no government levy), federal law gives you strong protections, but only if you report fast. Your liability depends on how quickly you notify the bank:¹³

Within 2 business days: maximum liability of $50.
After 2 business days but within 60 days of your statement: maximum liability of $500.
After 60 days: you can be liable for the full amount of unauthorized transfers that occur after that 60-day window, with no cap.

Those tiers make the first two business days critical. Review statements regularly, and call the bank the moment something looks wrong. Once you report, the bank has to investigate. If the investigation runs longer than 10 business days, the bank must provisionally credit your account for the disputed amount while it keeps looking.¹⁴

Contact the company that initiated the withdrawal too, dispute the charge, and request a reversal. Keep records of every call and email. If the bank won’t resolve the problem, file a complaint with the Consumer Financial Protection Bureau, which forwards complaints to the company and tracks responses.¹⁵

1
eCFR. 12 CFR 1005.10 – Preauthorized Transfers
2
Office of the Law Revision Counsel. 15 USC 1693e – Preauthorized Transfers
3
eCFR. 12 CFR 1026.12 – Special Credit Card Provisions
4
U.S. Marshals Service. Writ of Garnishment
5
Office of the Law Revision Counsel. 26 USC 6331 – Levy and Distraint
6
Internal Revenue Service. What Is a Levy?
7
eCFR. 26 CFR 301.6332-3 – The 21-Day Holding Period Applicable to Property Held by Banks
8
Internal Revenue Service. Information About Bank Levies
9
Office of the Law Revision Counsel. 20 USC 1095a – Wage Garnishment Requirement
10
Office of the Law Revision Counsel. 31 USC 3720A – Reduction of Tax Refund by Amount of Debt
11
U.S. Department of Education. U.S. Department of Education to Begin Federal Student Loan Collections, Other Actions to Help Borrowers Get Back Into Repayment
12
eCFR. 31 CFR Part 212 – Garnishment of Accounts Containing Federal Benefit Payments
13
eCFR. 12 CFR 1005.6 – Liability of Consumer for Unauthorized Transfers
14
Consumer Financial Protection Bureau. 1005.11 Procedures for Resolving Errors
15
Consumer Financial Protection Bureau. Submit a Complaint