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When a business customer refuses to pay what they owe, winning a lawsuit and getting a judgment is an important step — but it’s not the final goal. The real challenge begins after you’ve earned that judgment: figuring out how to collect. Two of the most common tools creditors can use are bank levies and wage garnishments.
While both methods can be effective, they work in very different ways and provide unique benefits and challenges, especially in the realm of commercial debt collection, where your debtor is usually another business. This article explains how each approach functions, when one might be more appropriate than the other, and what business owners need to know before selecting either option.
Understanding the Basics
Bank Levy
A bank levy is a legal procedure that allows a creditor to withdraw funds directly from the debtor’s bank account. Once you have a valid judgment, you can work through the court and a marshal or sheriff to “freeze” and seize the debtor’s account balances to satisfy what’s owed. In commercial cases, this often involves targeting a business checking account or money market account.
Wage Garnishment
Wage garnishment involves withholding part of the debtor’s wages or salary and sending it to you, the judgment creditor, until the debt is paid. The employer receives a court order or sheriff’s income execution to deduct a portion of the debtor’s paycheck and forward it to the creditor.
The key point for commercial debt: wage garnishment usually applies to individuals, not companies. If your debtor is a business entity like an LLC or corporation, there are no “wages” to garnish — but if you have a personal guarantee from an owner or principal, wage garnishment might be an option.
The Commercial Debt Context
In consumer debt cases, wage garnishment is common because most debtors are individuals with steady jobs. In commercial collections, the situation differs. Debtors are usually business entities, which means they don’t have wages in the traditional sense. Cash flow is often unpredictable — even if the business earns revenue, it may be spread across multiple accounts or reinvested immediately. Asset protection tactics are more common, such as keeping minimal balances in any one bank account to avoid levies. Understanding these differences is essential when choosing between a bank levy and wage garnishment.
How a Bank Levy Works in Commercial Collections
Step 1: Obtain a Judgment
You can’t simply demand a bank levy without first winning in court. You must have a judgment confirming the debt is valid and stating the amount owed.
Step 2: Locate the Bank Account. Before you can levy, you need to find out where the debtor banks. This information can be obtained through past payment records (such as a check they wrote you), public filings, corporate disclosures, or post-judgment discovery.
Step 3: Serve the Levy.
Your attorney will coordinate with a sheriff or marshal to serve a levy on the bank. Once served, the bank must freeze the funds in the account (up to the amount of the judgment) and eventually release them to you.
Step 4: Collect the Funds
If the funds are available, the bank will turn them over after a required holding period. If the account is empty or has insufficient funds, the levy may capture nothing — but it can still disrupt the debtor’s operations.
Advantages of a Bank Levy in Commercial Debt Collection
Provides direct access to liquid funds. Allows for the potential of immediate full payment if funds are available. Can be repeated if the debtor replenishes the account later, or if an order of the courts is obtained.
Limitations
Requires accurate bank account information. If accounts are empty, it won’t generate funds. Some debtors use multiple accounts or frequently move funds to avoid levies.
How Wage Garnishment Works in Commercial Collections
Wage garnishment is only allowed when the debtor is an individual, such as a sole proprietor, partner, or business owner who signed a personal guarantee.
Step 1: Obtain a Judgment
As with a bank levy, you must first win in court.
Step 2: Identify the Employer
You need to find out where the debtor works. If they are self-employed or own a business, wage garnishment may not apply — but other collection methods might.
Step 3: Serve the Garnishment Order.
An income execution is issued to a sheriff or marshal who then serves the employer, requiring them to withhold part of the debtor’s wages (within legal limits) and send the payments to you until the judgment is paid in full.
Step 4: Receive Payments Over Time
Payments are deducted from each paycheck and sent to you until the debt is paid in full or the employment ends.
Advantages of Wage Garnishment
Reliable, steady stream of payments if the debtor remains employed. It is harder for the debtor to avoid once in place. Creates ongoing pressure to settle the debt.
Limitations in Commercial Debt Cases
Apply only to individuals, not business entities. If the debtor switches jobs, payments halt until the new employer is found and served. Garnishment limits are set by law, which can slow repayment for large debts.
Comparing Bank Levy and Wage Garnishment in Commercial Collections
| Factor | Bank Levy | Wage Garnishment |
| Applies To | Business or individual bank accounts | Individual wages only |
| Speed of Payment | Potentially immediate if funds are available | Gradual, over time |
| Effectiveness in Commercial Cases | High (if accounts have funds) | Limited (only if personal guarantee and steady wages) |
| Risk of Avoidance | High if debtor moves funds frequently | Moderate — debtor could change jobs |
| Potential to Disrupt Debtor | High — freezes account access | Medium — reduces take-home pay |
In pure business-to-business collections, the bank levy is almost always the more relevant tool because the debtor isn’t an employee earning wages. Wage garnishment becomes useful when you can target an individual owner or guarantor.
Strategic Use of Each Collection Tool
When to Use a Bank Levy
You have recent bank account details for the debtor. You suspect the debtor has funds in a specific account. You want to collect immediately rather than through long-term repayment.
When to Use Wage Garnishment
The debtor is an individual with a regular paycheck. You have a personal guarantee from a business owner. You’re willing to collect over time rather than in one lump sum.
When to Use Both
In certain situations, you might be able to employ both tools — for example, pursuing a business account while also garnishing the wages of an owner who personally guaranteed the debt. This dual approach can maximize recovery and put significant pressure on the debtor to settle.
Common Pitfalls to Avoid
- Not Updating Debtor Information: A bank levy is ineffective without accurate account details. Similarly, wage garnishment depends on current employer information. Post-judgment discovery is crucial.
- Misunderstanding Legal Limits: State and federal laws restrict wage garnishment percentages and safeguard specific bank account funds from levy. Commercial creditors should collaborate with experienced attorneys to prevent errors.
- Ignoring the Personal Guarantee: Many business owners fail to obtain or overlook that they have a personal guarantee on a credit line, lease, or supplier account. This guarantee can lead to wage garnishment or personal asset seizure.
- Waiting Too Long: Time is the enemy in collections. The longer you wait, the more likely it is that assets will be moved or wages will change.
The Role of an Experienced Commercial Collections Attorney
While it’s possible to read about bank levies and wage garnishments online, the process remains complicated. Each state has its own rules, paperwork requirements, and exemptions. In New York, for instance, levies must be carried out through a marshal or sheriff, and garnishment limits are established by law.
An attorney specializing in commercial debt collection in New York state can evaluate whether a levy or garnishment is the better approach, locate debtor assets and employer details, prepare and serve the necessary court orders, coordinate with enforcement officers to execute the process, and prevent costly procedural errors that could delay or impede collection.
Choosing the Right Path for Your Business
If your goal is to get paid quickly and the debtor is a business entity, a bank levy is often the most direct and effective tool. If your debtor is an individual or you have a personal guarantee, wage garnishment might provide steady, reliable payments. The most successful commercial collections efforts usually start with a clear legal plan, tailored to the debtor’s financial situation and designed to apply maximum lawful pressure to recover what you’re owed.
Bank levies and wage garnishments are both strong tools for enforcing judgments — but in commercial collections, they serve different purposes. A bank levy is usually the more effective choice when dealing with business debtors, while wage garnishment works well for individuals with regular paychecks. Understanding the difference — and choosing the right tool at the right moment — can be the key to turning an unpaid judgment into money in your account.
If your business is owed money or has a judgment you’re having trouble enforcing, Rosenthal & Goldhaber can assist you in selecting the right strategy — and carrying it out successfully. Our team has decades of experience in commercial debt collection, bank levies, and judgment enforcement. Contact us today for a consultation and start recovering what you’re owed.
Frequently Asked Bank Levy vs. Wage Garnishment Questions
Yes, if circumstances permit. For example, you might levy the business’s bank account while garnishing the wages of an owner who signed a personal guarantee. This can improve your chances of full recovery.
If the debtor’s account has enough funds, you could receive payment within weeks of serving the levy. If the account is empty, you may need to try again later or use other enforcement tools.
You will need updated information to continue collections. This can be obtained through post-judgment discovery, asset searches, or subpoenas. A collections attorney can handle this efficiently.
Most states allow wage garnishment, but the rules — including the percentage of wages that can be taken — differ. In New York, for example, the limit is usually 10% of the debtor’s gross wages or 25% of disposable earnings, whichever is less.