Can a Company Take Money From Your Bank Account?

A company can take money from your bank account only through one of four lawful routes: an authorization you gave it, your own bank’s right of setoff, a court-ordered garnishment, or a specific government levy. Any withdrawal that doesn’t fit one of those categories is unauthorized, and federal law gives you a way to claw it back if you move fast.

Payments You Already Authorized

The most common route is one you opened yourself. When you hand a company your account and routing numbers for a mortgage, gym membership, subscription, or utility, you’re giving it permission to debit your account on a schedule through the ACH system. Federal law requires 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 you’re canceling, then call your bank and place a stop payment order at least three business days before the next scheduled debit.² Your bank can accept the stop payment by phone, but it may require written confirmation within 14 days; if you don’t follow up in writing, the oral request expires.¹ Banks typically charge a fee per stop payment order.

Your Own Bank Can Take Funds to Cover Debts You Owe It

If you owe money to the same bank where you keep your checking or savings account, that bank can pull funds from your deposit to cover the overdue debt without going to court. This is called the right of setoff, and it’s baked into the account agreement you signed. A bank that holds your auto loan, for example, can move money out of your checking account if you fall behind.

Setoff only works within the same institution. Your bank cannot reach into your deposits to pay a debt you owe to a different lender. There’s also one carve-out worth knowing: 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 that credit card balance through normal collection, but it cannot help itself directly from your checking account.

Outside Creditors Must Go Through Court

Medical providers, credit card companies you don’t bank with, and debt collectors cannot touch your account without a judgment. The creditor has to file a lawsuit, serve you with notice, and win a money judgment. Only then can it ask the court for a garnishment order — sometimes called a bank levy or writ of garnishment — directing your bank to freeze and turn over funds.⁴

Once your bank receives the order, it freezes funds up to the judgment amount. You should have received notice of the lawsuit itself, but the freeze can hit your account before you learn a garnishment is coming. An unexpected zero balance is sometimes the first real warning. Banks also charge a processing fee for handling the order, and that fee comes out of your account even if no funds ultimately go to the creditor.

Many states protect a minimum balance in your account from garnishment regardless of where the money came from, but coverage varies widely. Roughly a third of states offer some automatic protection; many others protect nothing beyond federally exempt benefits. Look up your state’s rule, because the exemption doesn’t apply automatically everywhere.

Government Levies That Skip the Courts

Some government agencies can bypass court entirely and levy your account under their own administrative authority. The two biggest sources are unpaid federal taxes and defaulted federal student loans.

IRS Bank Levies

The IRS can seize funds from your account for unpaid federal taxes after sending written notice at least 30 days before the levy.⁵ In practice, the IRS sends several notices before it reaches that point, ending with a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.”⁶ That final notice carries the right to request a Collection Due Process hearing before the levy happens.

When the IRS does levy your account, your bank must hold the frozen funds for 21 calendar days before sending the money to the IRS.⁷ The window exists so you can contact the IRS, correct errors, or arrange a payment plan. You cannot withdraw the frozen funds during the hold, but if you resolve the issue in time, the IRS can release the levy before the bank turns anything over.⁸ Twenty-one days is not much time.

Federal Student Loans

For defaulted federal student loans, the Department of Education can garnish up to 15% of your disposable wages without a court order, provided it gives you 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, which requires at least 60 days’ notice before the offset.¹⁰ These collection activities restarted in 2025 after a pandemic-era pause.¹¹ State tax authorities generally have similar administrative powers to reach bank accounts for unpaid state taxes.

Federal Benefits Your Bank Must Protect

Even a valid garnishment order cannot sweep up certain benefits. Federal law protects specific payments so recipients aren’t left unable to cover basic needs:

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, the bank has to protect them automatically. On receiving a garnishment order, the bank looks back over the previous two months, adds up the federal benefits directly deposited during that window, and shields that amount (or the current balance, whichever is less) from the freeze. The bank cannot charge its garnishment processing fee against the protected amount either.¹²

What if the account holds both benefits and other income? The bank calculates the protected amount from the direct-deposited benefits regardless of what else sits in the account.¹² Anything above that protected floor is treated like any other money and can be frozen. If you receive $1,500 in Social Security and your account also holds $2,000 in freelance income, the benefit portion is safe and the rest is exposed. Keeping benefits in a separate account doesn’t change the legal calculation, but it makes disputes cleaner if something goes wrong.

Joint Accounts Are Exposed to a Co-Owner’s Creditors

If your name is on a joint account with someone who has a judgment against them, the entire balance can be frozen in many states, even if most of the money is yours. Some states cap the creditor at roughly half the account. Others protect the account fully if the co-owners are married and hold it as tenants by the entirety. Community property states run on their own set of rules.

The same problem shows up with IRS levies on accounts where the tax debtor is only a signatory. If the IRS levies an account you share with an elderly parent whose name is on it, the true owner of the funds can contact the IRS and provide proof — bank statements or other documentation of where the deposits came from.⁸ If you’ve been added to a relative’s account for convenience, both of you should understand that a creditor of either holder can tie up the money.

How to Fight a Freeze or Levy

Finding your account frozen is jarring, and the deadlines to respond are short.

File a Claim of Exemption

If the frozen funds trace to an exempt source — Social Security, veterans’ payments, or another protected category — you can file a claim of exemption with the court. The garnishment notice should explain how to file and the deadline, which is short and strictly enforced. You’ll need deposit records showing where the money came from. If the creditor contests your claim, a hearing gets scheduled. Attend it. Missing the hearing usually means losing.

Move to Vacate a Default Judgment

Sometimes the garnishment traces back to a default judgment you didn’t know about, perhaps because you were never properly served or were hospitalized and couldn’t respond. In that case, you can file a motion to vacate the judgment. Courts generally require you to show both a valid reason for not responding and a legitimate defense to the original debt. Improper service, fraud by the creditor, and genuine emergencies are recognized grounds in most jurisdictions.

Use the 21-Day IRS Window

For an IRS levy, the 21-day hold is your opening. Call the number on the levy notice and work the options: an installment agreement, a hardship claim, or a correction if the amount is wrong. If you received the Final Notice earlier and didn’t request a hearing then, you may still be able to request an equivalent hearing after the levy, though your rights narrow the longer you wait.

When the Withdrawal Was Truly Unauthorized

If money leaves your account without any authorization, court order, or government levy behind it, federal law gives you strong protection, but only if you report it quickly. Your liability rises the longer you wait.¹³

Report within 2 business days: your maximum liability is $50.
Report after 2 business days but within 60 days of your statement: your maximum liability rises to $500.
Report after 60 days: you could be liable for the full amount of any unauthorized transfers that occur after the 60-day window, with no cap.

Those tiers make the first two business days critical. Check statements regularly, and call your bank the moment something looks off. 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, so you aren’t left without funds during the process.¹⁴

Contact the company that pulled the money too, dispute the charge, and ask for a reversal. Keep records of every call and email. If your bank doesn’t resolve the problem or you think it’s mishandling the dispute, file a complaint with the Consumer Financial Protection Bureau, which forwards complaints to the company and tracks the response.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
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