Find Me Funders
Levy
Also called bank levy, tax levy, seizure.
The actual seizure of funds or property to satisfy a debt, as opposed to a lien, which is only a claim against it — and, for most small businesses, a bank account frozen without warning.
Drafted with AI assistance and checked by a person. Its factual claims were verified against the sources listed at the end, by Find Me Funders research desk.
What it means
A lien says a creditor has rights in property. A levy takes it. The distinction is the difference between a problem you can plan around and a Tuesday morning where nothing clears.
Two routes
The second-order effects
These usually matter more than the amount taken. Your bank freezes the account. Cheques bounce and ACH debits return. Payroll fails. And your funding agreements almost certainly list an attachment or levy against your accounts as an event of default in its own right, separate from any missed payment — so the levy triggers a default even if every debit had been honoured.
A levy served on your customers, for receivables owed to you, does something else again: it tells your customers you are in trouble.
Where this one catches people
A single levy can end a solvent business, through the chain reaction rather than the amount seized. The account freezes, the daily debits on any advance return unpaid, the returns trigger default, the default triggers acceleration and possibly cross-defaults across every other position, and Friday's payroll does not go out. All of that can happen in one week over a judgment you were disputing or a tax balance you were in the middle of negotiating.
Two practical points. Do not ignore a final notice of intent to levy — the window to request a hearing is short and it is stated on the notice, and requesting one is the cheapest step available to you at that stage. And do not run the entire business through the single account your funders debit; keeping operating cash in more than one place is basic continuity planning. Be aware, though, that moving money specifically to defeat a creditor you know about is a different act entirely and can be attacked as a fraudulent transfer.
Where you will meet this term
Read next
Sources and checks
Every figure on this page traces to a document someone read, on a date. Where a check is past its review date it says so rather than passing as current.
-
The IRS may levy administratively after notice and demand, without going to court
definition"If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax...by levy upon all property."
-
A final notice of intent to levy must precede the levy by at least 30 days
definition"The notice required under paragraph (1) shall be...no less than 30 days before the day of the levy."
-
The notice carries a Collection Due Process hearing right, and the window to request the hearing is 30 days
definition"No levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of their right to a hearing under this section before such levy is made", given "not less than 30 days before the day of the first levy".
-
A bank served with an IRS levy holds the deposits for a statutory waiting period of 21 days before surrendering them
definition"Any bank (as defined in section 408(n)) shall surrender (subject to an attachment or execution under judicial process) any deposits (including interest thereon) in such bank only after 21 days after service of levy."
-
A judgment creditor levies through the sheriff, either by serving the execution on a garnishee or by seizing property
definition"The sheriff ... shall levy upon any interest of the judgment debtor or obligor in personal property not capable of delivery, or upon any debt owed to the judgment debtor or obligor, by serving a copy of the execution upon the garnishee, in the same manner as a summons"
-
Moving money to defeat a known creditor can be attacked as a voidable transfer
definitionA transfer is voidable where made "with actual intent to hinder, delay or defraud any creditor of the debtor", with factors including transfer to an insider, retention of control, and insolvency shortly after the transfer.
Levy — common questions
What does levy mean?
The actual seizure of funds or property to satisfy a debt, as opposed to a lien, which is only a claim against it — and, for most small businesses, a bank account frozen without warning.
Where does levy catch people out?
A single levy can end a solvent business, through the chain reaction rather than the amount seized. The account freezes, the daily debits on any advance return unpaid, the returns trigger default, the default triggers acceleration and possibly cross-defaults across every other position, and Friday's payroll does not go out. All of that can happen in one week over a judgment you were disputing or a tax balance you were in the middle of negotiating.
Is levy the same as an interest rate?
Levy is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does levy apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit.
Is there a worked example of levy?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside levy?
Automatic stay, Confession of judgment, Cross-default, Event of default, Garnishment.
Has this definition been checked?
Yes. Its claims were verified against the sources listed at the end of this page, and the reviewer is named.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.