It can be a nasty surprise to find your checking account frozen. If a bank freezes your account, you will have limited access to it. They can verify your transactions and receive certain deposits. However, you will not be able to withdraw or transfer your money until the problem that froze the account is erased.
Make sure you contact your bank immediately if your account is frozen. Bank accounts are frozen for a variety of reasons, and each reason requires certain actions to unfreeze the account. Below are the top three reasons why a bank account may be frozen.
Suspicious or illegal activities
A bank can freeze your account if they suspect you are using your account illegally, z. B. For money laundering or cashing checks. Sometimes a bank will also freeze an account in connection with terrorist financing. This includes receiving suspicious payments from a third country or depositing large amounts of money in a suspicious manner, which will flag your account. Even gambling can cause a bank to freeze an account if they suspect suspicious activity.
It is rare for bank accounts to be frozen for these instances, especially for innocent users. It is best to seek the help of an attorney to help you resolve this type of case.
Unpaid debts by creditors
Creditors can access your account for unpaid debts; however, the creditor must obtain court approval before taking action. For account holders who have their loan accounts at the same institution as their bank account, the lender can gain access to a checking or savings account to collect payments on defaulted loans without first filing a lawsuit or judgment. Generally, for these accounts, you must first sign the fine print that gives the bank this authority.
Once your account is frozen over unpaid debt, it's important to get the attorney's information from your bank right away. You need to have a better idea of what is happening with your account and work out a payment arrangement. Unfortunately, ignoring a frozen bank account can make the problem worse, leading to a drop in your credit score and an increase in bank fees.
Unpaid debts to the government
People who owe loans or taxes to the government may also find their bank accounts frozen. For unpaid taxes, the IRS can impose a tax levy that should not be lifted until the debt is paid in full.
For unpaid student loans, the government can do a few different things that don't require a judgment, including seizing your tax refund or decorating a percentage of your paycheck each month.If your loan is in default, your federal lender can likely garnish wages and taxes without pursuing a judgment from the courts. Student loans don't go away until after the payment is made. They only disappear with bankruptcy under certain circumstances.
Key Takeaways
With the possibility of your bank account being frozen due to debt collectors or suspicious activity, your bank account should not be free of funds. Depending on which state you live in, there are limits on the type of income you can receive from your account. For example, in some states, it's illegal for creditors to withdraw Social Security benefits, child support, workers' compensation and more. However, you must apply for an exemption within 10 days after your account is frozen.
Contact the legal department to assist you in clearing your bank account. Consumer bankruptcy attorneys won't force you to pursue bankruptcy, but will help you understand the legal actions creditors can take, as well as your rights in these situations.