A financial institution served with a garnishment or levy becomes a stakeholder between a judgment creditor and its own customer, with liability available in both directions.

On receipt. Verify the account, identify the balance at the moment of service, and place a hold consistent with the writ. Over-holding exposes the bank to customer claims; under-holding exposes it to the creditor.

Federal benefit protections. Rules require a look-back review of the account for direct-deposited federal benefit payments and the protection of a calculated amount from freeze, with notice to the customer. This applies automatically and without a claim of exemption.

Exemptions generally are asserted by the customer through a court process. The institution’s role is usually limited to giving the required notice and following the court’s determination.

Setoff. Many institutions have a contractual or common law right of setoff for debts owed to them, and the interaction between setoff and a served garnishment is timing-sensitive and state-specific.

Joint accounts, trust accounts and fiduciary accounts each raise separate questions about whose funds are reachable.

Answers must be filed within the period the writ specifies. Failure can result in the institution being liable for the whole judgment, which is the most expensive back-office error available in this area.