When we receive a levy or a garnishment that requests an “account balance,” should we use the memo ledger balance or available funds balance? May we remove the funds to be paid out at a later date, or does a hold on the account mean that funds need to be held upon request?

We recommend using the ledger balance, which should include intraday items such as ATM or cash withdrawals, as opposed to the available balance, which may not reflect pending such intraday items.

For purposes of citations to discover assets and wage garnishments, Illinois law requires banks to freeze funds in their “possession or control” or their “possession, custody or control,” respectively. Illinois law generally does not define how an account balance in the bank’s “control” should be calculated — except in the case of child support liens, which apply only to “finally collected funds.” Consequently, for non-child support levies or garnishments, we believe that a bank could freeze the most current ledger balance, incorporating any intraday items to ensure that your bank captures the most accurate picture of the account balance. This reasoning is reflected in the federal rules applicable to garnishments and levies of accounts with federal benefit payments; when performing a lookback to preserve those exempt payments, the federal rule requires use of the ledger balance.

Also, we do not recommend removing funds after receiving a levy or garnishment. When your bank receives a garnishment summons from an Illinois court, you must hold all non-exempt funds in the customer’s account up to the judgment amount, pending further order of the court. If a garnishment order is entered in favor of the judgment creditor, your bank will receive a copy of the order providing the amount to be turned over. The funds should not be removed from the account until that time.

Similarly, a writ of garnishment issued in a federal court action requires that your bank withhold and retain any nonexempt funds in which the customer has a substantial interest, pending further order of the court. If the judgment creditor is entitled to nonexempt funds, a subsequent order will be issued directing your bank how to proceed.

For resources related to our guidance, please see:

Illinois Code of Civil Procedure, 735 ILCS 5/2-1402(m)(2) (A citation to discover assets “becomes a lien . . . (2) When the citation is directed against a third party, upon all personal property belonging to the judgment debtor in the possession or control of the third party or which thereafter may be acquired or come due the judgment debtor and comes into the possession or control of the third party to the time of the disposition of the citation.”)

Illinois Code of Civil Procedure, 735 ILCS 5/12-707(a) (“To the extent of the amount due upon the judgment and costs, the garnishee shall hold, subject to the order of the court any non-exempt indebtedness or other non-exempt property in his or her possession, custody or control belonging to the judgment debtor or in which the judgment debtor has any interest. The judgment or balance due thereon becomes a lien on the indebtedness and other property held by the garnishee at the time of the service of garnishment summons and remains a lien thereon pending the garnishment proceeding.”)

Illinois Public Aid Code, 305 ILCS 5/10-16.7(e) (“A financial institution is obligated to debit the account of an obligor pursuant to this Section only if or to the extent: . . . (2) there are finally collected funds in the account; and (3) the account is not subject to offsetting claims of the financial institution . . . .”)

Dept. of Treasury Interim Final Rule, 31 CFR 22, FAQ Paragraph 5 (“When the rule refers to an account balance, does that mean the ledger balance, memo ledger balance, available funds balance or memo available funds balance? When the rule refers to the account balance, it means the ledger balance. However, financial institutions should note that the requirement to provide access to funds is subject to the usual restrictions on funds availability.”)

Final Rule, Garnishment of Accounts Containing Federal Benefit Payments, 78 Fed. Reg. 32099, 32101 (May 29, 2013) “Some financial institutions commented that it was not clear whether the account balance for purposes of clause (ii) refers to the ledger balance, the memo ledger balance, the Regulation CC [3] available funds balance or the memo available funds balance. Other commenters noted that the procedure for calculating the protected amount does not take into account intraday postings of credits or debits. Therefore, depending on the time of day that an account review is performed and whether items have been posted to the account during the day, establishing a protected amount without taking into account intraday debits could result in the establishment of a protected amount that exceeds the funds in the account. For example, if $1,000 in protected funds were deposited during the lookback period, and the account balance was $600 at the open of business on the date of the account review, then the protected amount would be $600. If, however, the account review is performed in the afternoon, and all $600 had been withdrawn by the time the account review was performed, then the financial institution would be in the position of establishing and providing access to a $600 protected amount for an account containing no funds. . . . To address this incongruity, the Agencies are amending the rule to provide that the relevant account balance is the account balance when the account review is performed, so that the balance will include intraday items such as ATM or cash withdrawals. Financial institutions should not use the Regulation CC available funds balance . . . .”)

Illinois Code of Civil Procedure, 735 ILCS 5/12-707(b) (“The garnishee shall file, on or before the return date. . . ., a written answer under oath to the interrogatories, setting forth as of the date of service of the garnishment summons any indebtedness due or to become due to the judgment debtor and any other property in his, her or its possession, custody or control belonging to the judgment debtor or in which the judgment debtor has an interest.”)

Kirchheimer Brothers Co., 100 Ill. App.3d 360, 362 (1st Dist. 1981) (“The order does not direct respondent to pay the proceeds to anyone, nor does it adjudicate the rights of any claimants to the proceeds. It merely restrains respondent from paying the amount of the outstanding debt to defendants.”)

Federal Debt Collection Procedure, 28 USC 3205(2)(F) (“The writ shall state. . . . [t]hat the garnishee shall withhold and retain any property in which the debtor has a substantial nonexempt interest and for which the garnishee is or may become indebted to the judgment debtor pending further order of the court.”)

Federal Debt Collection Procedure, 28 USC 3205(7) (“After the garnishee files an answer and if no hearing is requested within the required time period, the court shall promptly enter an order directing the garnishee as to the disposition of the judgment debtor’s nonexempt interest in such property. If a hearing is timely requested, the order shall be entered within 5 days after the hearing, or as soon thereafter as is practicable.”)