Frozen Bank Accounts
Judgment creditors can freeze your bank account, and then collect on unpaid debts from those funds.
When your bank account is frozen, you can’t use your money, outstanding checks will not clear, and you may be responsible for bank charges as a result. When creditors freeze your account, it's also called a bank levy, attachment, or garnishment.
Read on to find out what a frozen bank account is and how it happens.
What Is a Frozen Bank Account?
A frozen bank account is an account that has been suspended and cannot be used to withdraw money, pay checks, make transfers, or fund your bill pay services.
Why Is an Account Frozen?
Generally, an account is frozen because you owe someone money. Your account could be frozen if you have unpaid judgments against you, or if you owe taxes or child support.
How Are Creditors Able to Freeze My Account?
Most creditors will need to get a judgment against you before they are able to freeze your bank account. Once they have a judgment against you, if you have not taken steps to pay the judgment or agreed to a payment schedule for satisfying the judgment, the judgment creditor can request that the court issue an order that directs the bank to freeze your account. These orders are often called garnishments or attachments.
Certain creditors can freeze your account without first getting a judgment. Federal or state authorities can issue their own attachment documents and send them to your bank to freeze your accounts for unpaid obligations such as taxes or child support.
Is the Entire Account Frozen or Just Part?
In most states, the bank can freeze up to two times the amount that is set out in the garnishment or attachment order. If this exceeds the amount in your account, your entire account will be frozen. If it does not, it will only be partially frozen.
Can I Continue to Make Deposits?
You can probably make deposits into the account, but you could be risking that the new deposits are frozen as well. If the amount in the account at the time it was frozen was less than two times the amount set out in the garnishment or attachment order, the new deposits will likely be frozen.
What If My Paychecks Are Electronically Deposited?
If your entire account is frozen, you will need to stop the direct deposits so that you can be sure you will have access to your money. If the bank accepts the deposit, it may be frozen along with the other money in the account.
Will I Receive Advance Notice?
It is unlikely that you will receive any advance notice. The bank is required to notify you when it receives the attachment but the account will be frozen by the time you receive the notice.
Challenging the Attachment
The notice that you receive should set out your rights to object to the attachment and may identify exemptions which would allow the funds to be released to you. The notice should provide the deadlines for you to object or challenge the attachment and identify the creditor and the case in which the attachment has been issued.
In most cases, to challenge the attachment, you will need to file papers with the court telling the judge why you don’t believe the attachment is appropriate.
Getting Your Money Back
If you owe the money that the creditor is trying to collect through the attachment, your options are limited. You can contact the creditor or the creditor’s lawyer to see if they will release the attachment. If they won’t, you need to take further action.
Claim exemptions. You can have funds which are exempt from attachment under state law released from the freeze by filing a paper with the court identifying the specific exemption you are claiming and identifying the funds that qualify for the exemption.
You will need to request a court hearing where you can attend and ask the court to lift the attachment as to the funds you are claiming as exempt. Common exemptions which might apply to the frozen funds are wages, child support, retirement funds, and social security. Exemptions vary by state so you will need to check the law in your area.
(To learn more, see our articles on Property Exemptions.)
Set up a payment plan. Some creditors, particularly government entities, will release the attachment if you set up a payment plan and begin to repay the debt. Contact the creditor to see if it will work with you.
Special Rules for Social Security Deposits
The Treasury Department has rules in place which require the bank to review any account subject to an attachment. If the bank determines that the funds in the account result from direct deposits of social security, it cannot freeze any direct deposits of social security benefits within the two preceding months.
However, if your social security deposits are mixed in with other deposits in the same account or if you have accumulated more than two months of security deposits, not all of the funds in the account will be automatically safe from the attachment.
(To learn more about ways that creditors can collect on overdue debts, see Debt Collection: Repossession, Wage Garnishment, Bank Levies, and More.)