Levy

What Is Levy?

A levy means that to pay a debt, a property or an asset of a person may be taken by the law. It is mostly a warrant granted by a government agency or a court order. Levies may be put on different things, such as the bank account, income, property, or personal items. To illustrate, if a person fails to pay their taxes, the government will withdraw the money from their accounts which have not been paid yet. Also, the creditor could get a garnishment letter to recover what is due from the debtor. Through levies, creditors can gain considerable power in any debt collection and enforcement process, usually resorted to only when other less forceful methods have been unsuccessful. Although they have to deal with legal restrictions and procedures to safeguard the debtors' rights, they have proved to be a strong tool in collecting payment.

Example

An example of levy is when a taxpayer does not pay their taxes which are supposed to be sent to the government. By the tax authority, after having tried all means of communication, it was discovered that the involved individual had ignored all the notices and the tax authority was left with the option of issuing a legal order. This is further followed by the relevant authority imposing a levy on the taxpayer's bank account and collecting a certain amount or the entire balance of funds to pay for the overdue tax debt. One may take as an example, a taxpayer having $5,000 tax debt who does not respond to the notices and follow up with payment. The tax authority may then issue a levy on the taxpayer’s bank account, withdrawing this amount directly from the available funds. This step is one of the tools used in tax collection due to its power enforcement that functions well in obliging people to pay taxes and thus helps the government to retain revenue for its operations.