Bank Account Freezes: What You Need to Know

When Your Bank Account is Frozen

A frozen bank account means a creditor has won a legal judgment against you for unpaid debt and the court has authorized them to access your funds. This typically occurs due to unpaid credit cards, medical bills, or unsecured loans.During the freeze, which often lasts around 21 days, you lose access to your money and can’t make withdrawals, transfers,or payments.

Limits on What Creditors Can Take

While a creditor can freeze your entire account, they can only seize the amount you owe plus any allowable fees, after deducting legally exempt funds. Exempt funds often include recent federal benefits, a portion of earned income, and certain state benefits. The exact rules vary by state, but if all your funds are exempt, the creditor cannot take any money,except in cases of student loan debt or overdue child support.

Rules for Freezing Bank Accounts

Before freezing your account, creditors must follow specific procedures, including notifying you of the lawsuit and obtaining a legal judgment. They may also need to send you a notice of the impending freeze. During the holding period,you have the opportunity to negotiate with the creditor or file an exemption claim to protect your exempt funds.

Preventing a Bank Account Freeze

If you’re facing a lawsuit, don’t ignore it! Consult a lawyer experienced in consumer law or debt collection to explore your options. They can help you defend yourself in court, file for bankruptcy, or negotiate a payment arrangement with the creditor.

Dealing with a Frozen Bank Account

If your account is frozen, act quickly. Try to reach a payment agreement with the creditor and carefully review all notices from your bank and the creditor. If you have exempt funds, inform your bank immediately and seek legal help if they refuse to release them. Also, make arrangements to reroute your incoming and outgoing transactions.

Protecting Your Benefits

If you receive federal benefits, consider opening a separate bank account for those deposits or using a Direct Express prepaid debit card to safeguard your money from creditors.

Remember, if you’re facing financial difficulties and the possibility of a bank account freeze, seeking professional legal advice is crucial. A lawyer can guide you through the process and help protect your rights and assets.