The creditor will go after the debtor’s bank account. When a bank account is seized, a creditor attempts to obtain money a debtor owes. A creditor will generally file a motion in court to go after the money in a debtor’s bank account.
What Is a Frozen Bank Account?
A frozen bank account cannot make a transaction. Account freezes are normally the result of a court order. In some cases, the bank may freeze an account itself. Accounts are usually frozen when the account holder has unpaid debts to creditors or the government. Accounts may also be frozen when suspicious activity is detected with the account.
Frozen accounts do not permit any debit transactions. Account-holders cannot withdraw, purchase, or transfer when an account is frozen. Account-holders may continue to deposit and transfer money into a frozen account. A consumer can put money into an account but cannot take money out of it. There is no set amount of time that an account may be frozen. Freezes may be lifted once an account holder satisfies the conditions of the freeze.
A frozen bank account has been suspended from use. The account holder can’t:
- Withdraw money
- Deposit money
- Write checks
- Transfer money
- Pay bills
Why Was My Bank Account Frozen?
When a bank account is frozen, it may be due to money owed to another individual or business. Account freezes may also result from outstanding debt to the Internal Revenue Service (IRS).
A creditor that has a judgment against an individual can have the individual’s account frozen. A creditor may freeze the account for up to twice the owed amount.
A bank account is frozen because a creditor requested the money in the account because of:
- Wage garnishment
- Back child support
- Back income taxes
To process an account freeze, banks must first receive a court order. When a receives a judgment, it is legally bound to freeze the account immediately. The bank is not required to inform the account holder of the freeze. The bank may also temporarily freeze the account in certain instances without a judgment from the court.
If a bank sends a notice to an account holder, the account holder can look for the lawyer and phone number listed on the notice. If the account holder did not receive a notice after their account was frozen, they can call the bank and ask for the lawyer’s name and phone number in order to settle the account.
Are There Other Reasons My Account May Be Frozen?
Accounts may be frozen for a variety of reasons. Regulators or courts may freeze accounts if the account holder fails to make due payments. Accounts may be frozen for violations of banking rules.
Banks may also freeze accounts if they believe the account activity is suspicious or fraudulent. Banks may freeze accounts in which the transactions were perhaps not taken by the account holder. A sudden or suspicious withdrawal or transfer to another account may indicate the account has been compromised. Accounts may also be frozen if the owner dies and an heir or administrator of the estate has not been named.
If a person is found to be complicit in a crime, their accounts may be frozen, especially for accounts held jointly with spouses and business partners. If a court of law or bank suspects illegal activity, an account may be frozen. Account-holders can request that the bank freeze their account, as well.
How Can I Unfreeze an Account?
Account freezes are not permanent. Certain actions from an account holder are generally required before freezes can be lifted. The account freeze is lifted when payment is made in full to clear an outstanding debt. The creditor may settle the debt for a lower amount in some cases.
In cases of suspicious activity, a bank will generally lift a freeze order after an investigation is complete. If any illegal activity is detected or if the account holder is found to be complicit in fraud through the account, the account may be permanently closed and any remaining funds seized.
Can the Creditor Freeze All the Money in My Account?
It depends on state law. A bank will freeze up to double the amount owed in most states. For example, if the judgment is for $400. A debtor has $1,000, and the bank will freeze $800. However, if the debtor only has $600, the entire bank account is frozen.
Should I Continue to Make Deposits Into My Bank Account?
No. The debtor risks the new funds being frozen by the bank. If the money taken initially is less than the amount of the judgment, most likely, the new funds will be frozen. A debtor should also stop making electronic payments, such as paychecks.
After your bank account is frozen, you can probably still make deposits. If your entire account is frozen, you must stop making direct deposits so that you can have access to your money. If the bank accepts the deposit, it might be frozen along with the other money in the account.
Will I Receive Advance Notice of the Bank Seizure?
No. A debtor will receive notice, but it’s usually after the bank account is frozen.
How Can I Fight a Bank Levy?
If you receive a notice, it should set out your rights to object and identify any exemptions that could allow the funds to be released to you. The notice should provide the deadlines to object to or challenge the notice. The notice will also identify the creditor and the case in which it has been issued.
To challenge an attachment, you’ll need to file papers with the court telling the judge why the attachment is incorrect.
How Can I Prevent a Bank Account Freeze?
Don’t ignore debt collectors. If you want to avoid having a creditor freeze your bank account in the first place, you must pay off your debts. You might be able to settle the debt by offering a lump-sum payoff or working out a payment plan. Some creditors, especially government entities, will release the freeze if you set up a plan to repay the debt. Contact your creditor to see if you can negotiate a plan.
Have your government assistance funds like Social Security direct deposited. If the government deposited benefits directly into your account within two months of the garnishment, the money that came from Social Security benefits or other government sources can’t be frozen. The bank has to ensure that you have access to two months of Social Security benefits. Exceptions exist for garnishments for past-due child support and federal taxes.
If your Social Security deposits are mixed in with other deposits in the same account, or if you’ve accumulated more than two months of deposits, some funds in the account may not be safe from the freeze.
Can I Get My Money Back?
A debtor has limited options to get the money taken by a creditor. One option is to claim exemptions.
Should I Talk to a Lawyer about Getting My Money Back?
Yes, a collection lawyer will advise you about your options to get your money back. They can provide you with advice for your case and can represent you in court in the event that a lawsuit needs to be filed. It is in your best interests to work closely with an attorney for your claim.