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What Can I Do About a Frozen Bank Account?

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  • Written By: B. Miller
  • Edited By: Andrew Jones
  • Last Modified Date: 15 July 2014
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A frozen bank account occurs when you owe a debt to a creditor that you have not paid; the creditor will then sue you in court. If you do not respond to the lawsuit, the creditor can then receive a judgment from the court and freeze the bank account. Laws differ in different states and countries, but in most cases, the money cannot immediately be taken out of the frozen bank account; this will require a second turnover order from a judge. Usually, the funds will simply remain frozen until the case is resolved.

Unfortunately, in many cases there is nothing you personally can do about a frozen bank account. Going into the bank will not make a difference, because they are required by law to keep the account frozen. It will be necessary to hire a lawyer and go into court to unfreeze the bank account, and to deal with the creditor who has frozen the account. Keep in mind that creditors cannot freeze a bank account without notice; you will first be notified that you are being sued in court.

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To prevent your bank account from being frozen, always try to pay bills on time, and always notify creditors if you move. If you cannot pay bills on time, contact the creditors to determine if you can work out a payment plan in exchange for closing the account, for example. Finally, if you receive notice that you are being sued in court by a creditor, respond to the lawsuit before it escalates to a frozen bank account. If you do receive notice from the bank that your account has been frozen, it will usually be accompanied by a letter with contact information for a lawyer; call that lawyer as soon as possible to begin reversing the process.

In the meantime, there are some things to keep in mind while the bank account is frozen. First, in many cases, public assistance or some other funds are exempt from being frozen; this might include veteran's benefits, social security income, unemployment, alimony, or other state benefits, among others. Proof will be required to release these funds. In addition, immediately stop any direct deposits to the account, as well as any automatic bill payments, and find somewhere else to cash your paychecks in the meantime. If checks were written that have not yet cleared the account, contact the people to whom the checks were written and ask them not to cash them.

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Discuss this Article

anon349055
Post 5

They can't simply freeze your bank account. They have to sue you in court first. You should get a lot of advance notice. The minute you smell a lawyer, clear out your accounts. Asset protection offshore only works if they don't know where the account is. You will probably need to use a Trust to make it invisible.

Contrary to popular opinion, offshore accounts are not about tax evasion, but about protecting your assets. Of course, the minute the IRS knows, then the lawyers know. It's self defeating, which is why the IRS thinks everyone is evading taxes. How do you evade taxes on a Swiss bank account? They don't pay any interest!

NathanG
Post 3

@miriam98 - I think you misunderstand. Even if a bank fails, depositors are insured by the FDIC to a certain amount.

Unless you’re a millionaire and have more than this amount, you have nothing to worry about. Having your bank account frozen could only happen if you fail to pay your bills, according to this article, and you are sued by your creditors.

I don’t think that there is any other scenario where this would happen. Perhaps a run on the banks might cause it to happen, I agree, but I think even then it would be temporary.

Look at what happens to the stock exchanges when investors panic and there is a massive sell off. Sometimes they just halt trading, for awhile, until everyone catches their breath. That’s what would happen with the banks.

miriam98
Post 2

@Charred - You don’t have to move your money offshore. But I think that it does make sense to diversify where you put your cash just as you would with your stock investments.

In other words, don’t put it all in one American bank account. Have several banks where you keep your money. If one bank fails, at least you haven’t lost everything.

Charred
Post 1

The biggest fear in an economic downturn is a massive run on the banks. In such a scenario, I think a lot of accounts would be frozen, through no fault of the depositors.

This is why a lot of wealthy people have offshore bank accounts, especially in places like Switzerland. I’ve always dreamed of doing that myself, but there was always something slightly suspicious about moving my money to an offshore location. I also wonder if the I.R.S. would go after me too.

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