If you have overdue debts, your creditors might take steps to collect directly from your bank by freezing your bank account—also called a bank account levy, attachment, or garnishment. When your bank account is frozen, you can’t withdraw money, outstanding checks won’t clear, you can’t make transfers, and you might be responsible for bank charges, like fees for having insufficient funds (NSF) in your account.
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. It’s unlikely that you’ll receive any advance notice about a frozen account. The bank has to tell you when it gets notice to freeze the account, but the account will most likely be inaccessible by the time you learn about it.
Most creditors need to file a lawsuit and get a judgment against you before freezing your bank account. If the creditor wins the suit, the court issues a money judgment to the creditor. This money judgment serves as proof of the amount owed and protects debtors from having money taken that they don’t owe. Once a creditor has the judgment against you, if you haven't taken steps to pay the judgment or agreed to a payment schedule for satisfying the debt, 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.
Though, not all creditors need to get a money judgment first before freezing your account. Federal agencies, like the Internal Revenue Service and the U.S. Department of Education, don’t have to go to court first. Instead, they can garnish or levy without a judgment after giving you notice of the intent to garnish or levy. Other federal and state authorities can also issue their own attachment documents and send them to your bank to freeze your accounts for unpaid obligations, such as child support.
Even after your bank account is frozen, you can probably still make deposits. But you could be risking that the new deposits will be frozen as well. If your entire account is frozen, you'll need to stop direct deposits so that you can be sure you'll have access to your money. If the bank accepts the deposit, it might be frozen along with the other money in the account.
The notice you receive should set out your rights to object to the attachment and might identify exemptions that would allow the funds to be released to you. The notice should provide the deadlines for you to object or challenge the attachment. It will also identify the creditor and the case in which the attachment has been issued.
In most cases, to challenge the attachment, you'll need to file papers with the court telling the judge why you believe the attachment is inappropriate.
You can take steps to avoid a frozen bank account or to make it easier to have the funds released if they're frozen.
If you want to avoid having a creditor levy your bank account in the first place, you need to deal with your debts. For example, you might be able to settle the debt by offering a lump-sum payoff or working out a payment plan. Some creditors, particularly government entities, will release the attachment if you set up a plan to repay the debt. Contact the creditor to see if it will work with you.
The Treasury Department has rules in place which require the bank to review any account subject to an attachment. If the government deposited benefits directly into your account within two months prior to the garnishment order it can't freeze money that came from Social Security benefits (or benefits from certain other government sources). Basically, the bank has to ensure that you have access to two months worth of Social Security benefits. Exceptions exist for garnishments or attachments for past due child support and federal taxes.
But 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—not all of the funds in the account will be automatically safe from the attachment.
You can have funds that are exempt from attachment under state law released from the freeze by filing a paper with the court identifying the specific exemption you’re claiming and identifying the funds that qualify for the exemption. You’ll need to request a court hearing where you can attend and ask the court to lift the attachment as to the funds you're claiming as exempt. Exemptions vary by state, so you’ll need to check the law in your area.
If you bank account is frozen, consider talking to a lawyer in your state to learn about laws that might help protect your money and assets from creditors. If the account has funds that are exempt from garnishment under federal law, ask the bank to lift the freeze. You can also ask the bank to waive or refund NSF fees that resulted from the freeze. If the bank won’t release exempt funds, you'll most likely have to go to court to get access to them.