Debt collection can be a very difficult process for a business. Most companies do not have a specialized debt collection department, and even those that do may only have a few employees working in that area. The more complex a situation becomes, the more likely the company is to require outside help.
Oftentimes, businesses owed money by other organizations or individuals seek help from professionals, including lawyers. After all, once a debtor has proven that they are unwilling to prioritize meeting their financial obligations, creditors may need to look into more aggressive solutions than voluntary payment plans.
Taking legal action against a debtor is sometimes an option. A successful debt-related lawsuit could lead to a wage garnishment or liens placed against personal property. Could a creditor in California even seek to intercept someone’s tax return?
There are strict limits on tax interception
As a general rule, the only debts that can lead to the state intercepting someone’s federal or state tax refund are government debts. Someone who owes income tax or property tax debts might never see the deposit of their income tax refund. Even those behind on government loan payments could lose their tax refund to interception by the state.
Private creditors usually cannot intercept a tax refund before it reaches someone. However, creditors could access the funds deposited if they have a judgment and a writ of levy. Given that tax refunds are often one of the only times that people receive large lump-sums of money not already allocated to basic household expenses, they can represent money that creditors could claim if debtors do not already intend to use them to fulfill their financial obligations.
Any creditor hoping to intercept a tax refund before it hits somebody’s bank account likely needs to take legal action before the tax refund is available. The writ of levy that the courts authorize is typically valid for 180 days. If the creditor presents the writ of levy to a debtor’s bank, the institution may freeze or transfer funds up to the full amount owed.
Realistically, creditors have few ways of knowing when someone files their taxes and, therefore, when they might receive a refund. They can usually only utilize a writ of levy against an account one time unless they go back to court. Yet, there is little doubt that exploring every possible avenue for repayment may benefit those attempting to collect on a debt in California.