Frozen Bank Account in Hawaiʻi: How a Levy Works and How to Stop It
This guide is legal information, not legal advice, and reading it does not create an attorney-client relationship. Every situation is different, and the right move in your case depends on your facts. For advice about your own situation, start with my free questionnaire or call me at (808) 468-7000.
I work hard to keep this page accurate, but errors or omissions are possible and the law can change. The information here is current only as of the date above.
Can a creditor freeze your bank account in Hawaiʻi?
Yes. A judgment creditor here reaches a bank account through the same garnishee process used for wages, with your bank in the middle instead of your employer, and with one important difference: there is no percentage cap. Hawaiʻi limits what an ordinary creditor takes from a paycheck and sets no comparable limit on a deposit account, so a levy can reach the whole balance. Filing bankruptcy stops the money from reaching the creditor, and money still frozen when you file can sometimes be recovered. Federal benefits paid in by direct deposit are protected automatically, by the bank.
A frozen account is a different emergency from a garnishment. A levy takes what is in the account the moment it is served, all at once, and it can leave nothing for bills that are already due.
Key Takeaways
- A bank account has no percentage limit. Hawaiʻi caps what comes out of a paycheck and sets no equivalent cap on a deposit account.
- Directly deposited federal benefits are protected. Your bank has to review the account and leave two months of that money available to you.
- The money does not leave the same day. The bank holds it, reports to the court, and pays it over later. That gap is why filing quickly matters.
- The Hawaiʻi exemption list has no general protection for cash. The federal set carries a wildcard, and Hawaiʻi lets you choose between the two.
- Filing stops the payout the same day. The automatic stay takes effect the instant the case is filed.
- Frozen money is in a better position than collected money. What is still in the account is easier to protect than what the creditor already has.
- A tax agency does not have to sue you first. The Hawaiʻi Department of Taxation and the IRS can each reach an account without going to court.
How Much a Bank Levy Can Take
There is no percentage limit on what a bank levy can take from an account in Hawaiʻi, and that is the biggest single difference between a levy and a wage garnishment.
Hawaiʻi law is protective of a paycheck. For an ordinary debt it caps a wage garnishment at a small share that rises in tiers, figured on what is left after required withholding. I go through those tiers in my guide to wage garnishment.
Those tiers are written for wages, and they stop there. The same statute treats money a bank holds for you differently, with no percentage attached to it. The protection that keeps a garnishment to a fraction of a paycheck does not carry across to your account balance.
| Wage garnishment | Bank levy | |
|---|---|---|
| What it reaches | Part of each future paycheck | Whatever is in the account when your bank is served |
| How much | 5%, 10% and 20% in tiers | No percentage limit |
| Who holds the money | Your employer | Your bank |
| How often | Every payday until the debt is paid | Once, each time it is served |
| What filing does | Stops the next deduction | Stops the payout, and money still frozen may come back |
What bounds the freeze instead is the size of the claim. The court paperwork states a figure, and it cannot exceed 120 percent of what the creditor claims, including costs and interest. For a consumer judgment of almost any size that can exceed an ordinary checking balance, which is how an account ends up frozen down to nothing.
Social Security and Other Federal Benefits Are Protected Automatically
If Social Security, Veterans Affairs, Railroad Retirement or federal retirement benefits are paid into your account by direct deposit, a federal rule requires your bank to protect two months of that money automatically.
This is a United States Treasury regulation, and it deliberately puts the work on the bank. A bank served with a garnishment order has to review the account, look back two months, add up the benefit payments deposited in that window, and leave that amount available to you.
Two limits apply, and neither means the money stops being protected. The first is that the automatic review follows the direct deposit itself, so benefit money you deposited by hand is not identified the same way. But federal law makes Social Security, VA, federal retirement and railroad retirement benefits exempt from creditors for as long as the money is still identifiable as benefits, so what the bank does not protect for you on its own, you can still claim. The second limit is real: the rule steps aside when the order arrives with a federal notice attached showing a right to garnish federal benefits, which is how child support, alimony and debts owed to a federal agency are collected.
The freeze is partial, not total. The protected amount stays available to you, and only what sits above it is frozen. If your account holds directly deposited benefits and you cannot reach any of your money, tell me right away. Fixing that does not necessarily require filing a bankruptcy at all.
How a Creditor Reaches Your Account, and How Long You Have
A creditor in Hawaiʻi reaches a bank account by serving your bank with a garnishee summons, which makes the bank a garnishee, the same role your employer plays in a wage garnishment.
There is no separate bank levy statute here. An account runs through the same garnishment chapter that wages do, and in almost every consumer case the creditor has to sue you and win a judgment first.
The freeze begins the moment the summons reaches the bank. Service is effective when the summons is handed to the bank, left at its office, or arrives by mail, and from then the bank has to hold and secure the money.
The money does not leave that day. The bank has to report to the court first, and the creditor has to take a further step before the bank pays anything out. So the day your account freezes and the day the money is gone are not the same day, though the space between them is not long. That gap is the whole reason timing matters here.
What Happens to a Joint Account
A creditor with a judgment against one person can freeze an account that person shares with someone else, and the bank does not sort out whose money is whose before the freeze goes on.
Hawaiʻi law does have a rule for who owns what. During the lifetime of the people named on a joint account, it belongs to each of them in proportion to what each one put in, unless there is clear and convincing evidence that they intended something different. A co-owner’s money is not forfeited because of someone else’s judgment.
The problem is the order of events. The freeze comes first and the sorting out comes second, so the other person on the account can lose access to their own money while it is worked out, and the burden of showing what they contributed falls on them.
If your account is shared with anyone else, tell me at the start. It changes what I look at and what I do first.
What Hawaiʻi Exemptions Protect, and What They Do Not
Hawaiʻi’s own exemption list, the one that protects your household goods, your tools and your car from creditors, has no general protection for money in a bank account.
The Hawaiʻi list covers household furnishings and clothing, jewelry and one vehicle up to set amounts, the tools of your trade, and a burial plot. There is no line for money in general and no wildcard, meaning no pool of protection you can apply to whatever you choose. What the state list does protect is money of particular kinds: retirement and pension money, a workers compensation payment, an unemployment benefit, and insurance or sale proceeds for six months after you receive them.
There is a second exemption set, the federal one, and Hawaiʻi lets you choose between them. The federal set does include a wildcard, and that wildcard is what reaches cash. When a bank balance is what is at stake, that choice is usually what decides whether the money is protected. I go through both sets in my guide to Hawaiʻi bankruptcy exemptions.
How Bankruptcy Stops a Bank Levy
Filing a bankruptcy case stops a bank levy on the day it is filed, because the automatic stay takes effect the instant the petition reaches the court.
The automatic stay is a federal injunction, meaning a binding legal order. It comes from Section 362 of the Bankruptcy Code and needs no hearing and no argument from you. From the moment your case is filed the creditor cannot enforce its judgment, and it cannot act to create, perfect or enforce a lien against property of your bankruptcy estate. That is what saves money still sitting in the account: the levy was headed toward execution and a demand on the bank, and the stay stops it there. If you have had a bankruptcy case dismissed within the past year, that protection can be much shorter or may not arrive at all, so tell me at the start if you have filed before. I cover the stay in my Chapter 7 guide, which also answers what happens to a bank account when you file.
Getting Frozen Money Back
Money still frozen in your account when you file is in a better position than money the creditor has already collected, and the two situations are worth separating.
The money is still in the account. On the day you file, that balance is part of your bankruptcy estate. The creditor’s garnishment created a lien on it, and the Bankruptcy Code treats the creation of a lien as a transfer, which means it is something that can sometimes be undone. Several conditions have to be met. The lien has to have been created within the 90 days before you filed, an exemption you can claim has to cover the money, and the rest of your facts have to support it. Where those conditions are met, the freeze may be lifted.
The creditor already has the money. This is the harder version, and it runs on the same 90 day rule. Money paid over shortly before you filed can sometimes be recovered, and it still turns on an exemption covering it. The further back the payment, the less there is to work with.
Your account can stay frozen even after you file. A bank is entitled to hold while it gets direction, and a hold of that kind is not the same as the money going to the creditor.
Let’s talk about your options.
I have helped more than a thousand people through this. Tell me what you are dealing with and I will tell you what you may qualify for: Chapter 7, Chapter 13, or another path entirely.
When a Tax Agency Is the One Collecting
Neither the Hawaiʻi Department of Taxation nor the IRS needs a lawsuit or a judgment to reach your bank account.
The Hawaiʻi Department of Taxation collects unpaid state tax by levy on all property and rights to property, and a bank account is a right to property. The short list of property the tax statute exempts, such as clothing, schoolbooks and a limited amount of household goods and tools, does not cover money in an account.
The IRS works the same way. It levies a bank account without going to court, after sending a final notice of its intent to levy and of your right to a hearing.
That is why unpaid tax can turn into a frozen account without a lawsuit ever appearing. Which tax years bankruptcy can erase, and which ones it never can, is covered in my guide to tax debt in bankruptcy.
What to Do Right Now if Your Account Is Frozen
If your account is frozen at this moment, a few steps protect what is left.
- Work out what is in the account and where it came from. If any of it is directly deposited Social Security, Veterans Affairs, Railroad Retirement or federal retirement money, start there.
- Do not move money between accounts. A transfer after the bank has been served does not undo the freeze, and it makes the picture harder to sort out later.
- Keep the paperwork. The notice from your bank, and any court papers you were served, tell me which creditor is behind it and what date the clock started.
- Contact me before the money is paid over. What can be recovered depends on where inside that window your case is filed.
I work with people on every island, by phone or video, so where you live does not change what I can do about a frozen account, whether you are on Oʻahu, Maui, Kauaʻi, Molokaʻi, Lānaʻi or Hawaiʻi Island.
You do not need to know which of these applies to you before you call. Sorting that out is my job.
Frequently Asked Questions
Can a creditor freeze my bank account in Hawaiʻi without warning me?
Yes, once it has a judgment. In almost every consumer case a creditor has to sue you and win a judgment first, and after that it does not have to warn you before acting on the judgment. The freeze starts when your bank is served with the court paperwork, and notice to you is not what starts it. That is one reason a collection lawsuit is worth answering even when you know the debt is valid.
How much can a creditor take from a bank account in Hawaiʻi?
There is no percentage cap on a bank account. Hawaiʻi limits an ordinary wage garnishment to a small share of a paycheck, but it sets no equivalent limit on money a bank holds for you. What bounds the freeze is the figure stated in the court paperwork, which cannot exceed 120 percent of what the creditor claims, including costs and interest.
Can a creditor freeze a joint account if only one of us owes the debt?
Yes, the account can be frozen. Under Hawaiʻi law a joint account belongs, during the lifetimes of the people named on it, to each of them in proportion to what each one contributed, unless there is clear and convincing evidence of a different intent, so a co-owner’s money is not lost automatically. The difficulty is the order: the freeze comes first, the sorting out comes second, and the burden of showing what you put in falls on you.
Is my Social Security safe if my bank account is frozen?
Yes, when it arrives by direct deposit. Federal law requires your bank to review the account after it is served and to leave you the benefit payments deposited in the previous two months. The same protection covers Veterans Affairs, Railroad Retirement Board, and federal retirement benefits. It does not apply when the order is one collecting child support, alimony, or a debt owed to a federal agency.
Does filing bankruptcy stop a bank levy in Hawaiʻi?
Yes. The automatic stay takes effect the instant your case is filed, and it stops the creditor from completing the levy, so money still sitting in the account does not go to the creditor. Filing does not by itself hand back money the creditor has already collected, although that money can sometimes be recovered separately.
Can I get back money from a frozen bank account after I file?
Sometimes, yes, when the money is still sitting in the account, and it depends on your own facts. A garnishment creates a lien, the Bankruptcy Code treats the creation of a lien as a transfer, and a transfer made in the 90 days before filing can sometimes be undone when an exemption covers the money. Whether an exemption covers a bank balance in Hawaiʻi depends on which exemption set you use, which is one reason that choice matters here. No result is guaranteed, and the timing of your filing is a large part of it.
Why is my bank account still frozen after I filed?
A bank is allowed to keep a hold on an account while it gets direction about what to do next, and a hold of that kind is not the same as the bank paying the creditor or ignoring your bankruptcy. It is a pause, not a transfer. If your account is still frozen after your case is filed, tell my office.
Can the State of Hawaiʻi freeze my bank account for unpaid taxes?
Yes, and it does not have to sue you first. The Department of Taxation collects unpaid state tax by levy on all property and rights to property, which reaches a bank account without a court order. The short list of exempt property in the tax statute does not cover money in an account. The IRS reaches an account the same way. Filing bankruptcy stops a tax levy the same way it stops any other, and which tax years can actually be erased is a separate question.
Key Terms, Explained
- Levy
- A one-time seizure of what is in an account at the moment the paperwork is served, as opposed to an ongoing deduction from future income.
- Garnishee fund
- The Hawaiʻi statute’s name for what a garnishment reaches, which includes goods and effects, debts owed to you, money a third party holds for safekeeping, and wages.
- Exempt funds
- Money the law protects from creditors. Which money counts depends on which exemption set applies to your case, and directly deposited federal benefits are protected by a separate federal rule.
- Net contribution
- How Hawaiʻi divides a joint account between the people named on it during their lifetimes: each owns the share they put in, unless clear and convincing evidence shows a different intent.
- Automatic stay
- A federal injunction, meaning a binding legal order, that takes effect the instant a bankruptcy case is filed and halts collection, including a bank levy.
Sources & Legal Authorities
The authorities behind this guide.
- United States Code. 11 U.S.C. § 101(36); § 101(54)(A); § 362(a)(2); § 362(a)(4); § 522(b)(2); § 522(d)(5); § 522(f)(1)(A); § 522(h); § 541(a)(1); § 547; 26 U.S.C. § 6330; § 6331; 38 U.S.C. § 5301(a); 42 U.S.C. § 407(a)
- Federal regulations. 31 C.F.R. Part 212
- Hawaiʻi Revised Statutes. HRS § 231-25; § 560:6-103(a); § 651-121; § 652-1; § 652-2; § 652-2.6(b); § 652-3
- Other. Circuit Court of the State of Hawaiʻi, Garnishee Summons and Order
