Frozen Bank Accounts | Consumer Law Center, Inc. | San Jose, CA. (2024)

IMPORTANT NOTE: The information on this page applies to accounts that have been frozen because of private debts like credit cards, medical bills, and bank loans. If you have child support debt, or if you owe money to the government for taxes or a student loan, different rules apply.

What is a frozen bank account? A frozen bank account is a bank account that you cannot access because a creditor has placed a levy on it. When your bank account is frozen, you can put money into it, but you can’t take money out.

Why is my bank account frozen? A frozen bank account is a sure sign that a creditor or debt collector has obtained a court judgment against you (or your joint account holder, if you have a joint bank account). A creditor or debt collector cannot freeze your bank account unless it has a judgment. Judgment creditors freeze people’s bank accounts as a way of pressuring people to make payments.

Does my bank have to give me notice before freezing my account? No. Unfortunately, the law provides that when the bank receives a levy notice, it must freeze your account immediately, before notifying you. That is why most people discover that their account is frozen when they try to use their ATM cards and they suddenly do not work.

Does a judgment creditor have to give me notice before freezing my account? No. A judgment creditor does not have to give you specific notice before freezing your bank account. However, a creditor or debt collector is required to notify you (1) that it has filed a lawsuit against you; and (2) that it has obtained a judgment against you. If your first notice of the court case is a frozen bank account, you have not received proper notice under the law.

Do I need a lawyer to unfreeze my bank account? No. However, a lawyer is more likely to successfully obtained release of your bank accounts. You will need to act quickly as you only have 10 days after your bank account is frozen to file a claim of exemption.

How do I unfreeze my bank account?The best way to unfreeze your bank account is to erase the judgment against you. This is called “vacating” the judgment. Once the judgment is vacated, your account will be released automatically. A creditor or debt collector has no right to freeze your account without a judgment.

Can I negotiate a settlement to get my bank account released without going to court? If your bank account contains exempt benefits such as Social Security, you do not need to negotiate a settlement in order the lift the lien. See below for more information.

If your bank account contains recent wages or nonexempt funds, it is probably in your best interest to get the judgment vacated. Most of our clients find that they can negotiate a much better deal in court than they can outside of court. For this reason, we strongly recommend that you go to court and vacate the default judgment, if at all possible. There are many good reasons to try to vacate the judgment. In California, unpaid judgments are collectible for up to 10 years. Having an unpaid judgment exposes you to repeated efforts to freeze your bank account and/or garnish your wages. Judgments also appear on your credit report, where they affect your ability to get loans, employment, and housing. In most cases, you need to have the judgment vacated in order to clear it from your credit report. Therefore, for your own protection, you are almost always better off getting the judgment vacated instead of settling outside of court.

What if my frozen bank account contains only funds that are exempt from debt collection, like Social Security? If all the funds in your bank account are exempt from debt collection, a judgment creditor has no right to hold onto the account, and must release it immediately, even if it has a judgment against you. To obtain release of your account, you need to call the judgment creditor’s attorney (you can get the attorney’s contact information from your bank). Notify the attorney that all the funds in your bank account are exempt from debt collection and demand an immediate release of your account. The attorney may ask you to fax or mail proof of your exempt income. You can send up to three months of bank statements as proof (feel free to redact your bank statements to protect your privacy – the attorney only needs to see deposits, not purchases). Please be aware that the judgment creditor’s attorney may delay and make excuses to avoid releasing your exempt funds. If you have any trouble at all, you should follow our instructions to vacate the default judgment. In general, even when you have exempt funds, you are better off vacating the judgment if at all possible. In any event, you must file a Claim of Exemption within 10 day of the bank levy to preserve your rights.

What if my frozen bank account contains some funds that are exempt and some funds that are NOT exempt? This situation is also known as having “comingled funds.” In this scenario, your exempt funds are still exempt from collection, even though they are mixed with other, non-exempt funds. However, even though your funds are still exempt, it is often difficult to persuade a debt collector to release your account. Rather than argue with the debt collector on the phone, we advise you to go to court and vacate the default judgment as soon as possible in order to obtain the fastest release of your account.

Can a judgment creditor actually take money from my bank account? Yes. A creditor or debt collector can obtain a court order directing the Sheriff to levy funds from your account.

How long will a judgment creditor wait before seizing my funds? There is no set time limit. Some judgment creditors try to seize funds right away, and others never actually take funds at all. Most judgment creditors will wait at least a few weeks before attempting to levy your bank account.

Frozen Bank Accounts | Consumer Law Center, Inc. | San Jose, CA. (2024)

FAQs

What are your rights if your bank account is frozen? ›

What Are Your Rights If Your Bank Account Is Frozen? The notice you receive from the bank should set out your rights to object to the freeze and might identify exemptions that would allow the funds to be released to you. The notice should provide the deadlines for you to object to or challenge the attachment.

How do I get money out of a frozen bank account? ›

Contact Your Bank: Begin by reaching out to your bank. Understand the reason behind the account freeze. It could be due to various factors, such as insufficient funds, suspicious activity, or legal issues. and try asking them How to withdraw money from a frozen account.

Can a creditor freeze my bank account without notifying me? ›

A judgment creditor does not have to give you specific notice before freezing your bank account. However, a creditor or debt collector is required to notify you (1) that it has filed a lawsuit against you; and (2) that it has obtained a judgment against you.

How do you unfreeze a frozen bank account? ›

Alternatively, you can visit the nearest bank branch and discuss the issue with the Bank Manager. Once you are aware of the reason for your account being frozen, you can address the issue. For instance, if the KYC is incomplete, you can furnish details and unfreeze the account.

Who has the power to unfreeze bank account? ›

To clear the freeze, your bank may ask you to answer security questions, deliver verification codes, conduct digital 2-factor authentication, or provide some form of ID. This can be done online or through a visit to your bank.

Can I sue my bank for freezing my account? ›

If you find that they did not have a valid legal reason to close/freeze your account, you can file a complaint or a lawsuit against the bank.

How long can a bank legally freeze your account? ›

Frozen accounts do not permit any debit transactions. When an account is frozen, account holders cannot make any withdrawals, purchases, or transfers. However, they may be able to continue to make deposits and transfer money into it. There is no set amount of time that an account may be frozen.

What documents do you need to unfreeze a bank account? ›

If your account was frozen due to suspected fraud, you would need to prove your identity and confirm your recent transactions. This could involve answering security questions, providing identification documents, and reviewing your recent transactions with a bank representative.

How long does it take for a bank to unfreeze money? ›

For simpler situations or misunderstandings, usually, your account is frozen for seven to ten days. Complicated situations may require detailed information from you before the bank decides on the next course of action: to unfreeze or close the account entirely. This decision could take 30 days or more.

Can you still get direct deposit if your account is frozen? ›

Key Takeaways. You can still receive deposits into frozen bank accounts, but withdrawals and transfers are not permitted. Banks may freeze bank accounts if they suspect illegal activity such as money laundering, terrorist financing, or writing bad checks.

What type of bank account cannot be garnished? ›

Some sources of income are considered protected in account garnishment, including: Social Security, and other government benefits or payments. Funds received for child support or alimony (spousal support) Workers' compensation payments.

How can a creditor wipe your bank account without notice? ›

A judgment creditor does not have to give you specific notice before freezing your bank account. However, a creditor or debt collector is required to notify you (1) that it has filed a lawsuit against you; and (2) that it has obtained a judgment against you.

Can I ask my bank to unfreeze my account? ›

Take statements or receipts of the accounts you use to the bank and speak with a representative. If you can explain odd transactions, they should unfreeze your account relatively quickly. You may need legal assistance. Illegal activities would include money laundering.

Can a bank legally hold your money? ›

Yes. Your bank may hold the funds according to its funds availability policy. Or it may have placed an exception hold on the deposit. If the bank has placed a hold on the deposit, the bank generally should provide you with written notice of the hold.

How much does it cost to unfreeze an account? ›

What are the security freeze fees? Placing, temporarily lifting and permanently removing a security freeze on your credit reports is free.

Can a bank freeze your account and hold your money? ›

Can the bank freeze the account? Yes. The bank may temporarily freeze your account to ensure that no funds are withdrawn before the error is corrected, as long as the amount of funds frozen does not exceed the amount of the deposit. Or the bank may simply place a hold on the deposit amount.

How long can a bank freeze your bank for? ›

How Long Can a Bank Freeze an Account for? There is no set timeline that banks have before they have to unfreeze an account.

How long can your bank account be frozen for suspicious activity? ›

If your account is frozen because the bank is investigating your transactions, freezes typically last about 10 days for simpler situations or around 30 days for more complicated situations. But because there are no hard-and-fast rules on this, it's best to assume it could last a long time.

References

Top Articles
Latest Posts
Article information

Author: Kerri Lueilwitz

Last Updated:

Views: 5399

Rating: 4.7 / 5 (47 voted)

Reviews: 86% of readers found this page helpful

Author information

Name: Kerri Lueilwitz

Birthday: 1992-10-31

Address: Suite 878 3699 Chantelle Roads, Colebury, NC 68599

Phone: +6111989609516

Job: Chief Farming Manager

Hobby: Mycology, Stone skipping, Dowsing, Whittling, Taxidermy, Sand art, Roller skating

Introduction: My name is Kerri Lueilwitz, I am a courageous, gentle, quaint, thankful, outstanding, brave, vast person who loves writing and wants to share my knowledge and understanding with you.