Disclaimer: We are not qualified legal or tax professionals and are not giving advice. Always speak with a qualified professional before making any legal or financial decisions.
Are you the victim of a frozen or levied bank account? It’s not fun, is it? We can all agree that dealing with banks can be complicated, and trying to solve a problem like this may leave you feeling frustrated and helpless.
But don't worry! There are ways to unfreeze your bank account! We've seen it firsthand, and now we're ready to share our expert knowledge with you so that you can wrangle yourself out of this icy mess!
This article will discuss what causes bank accounts to freeze in the first place, as well as effective strategies for thawing out your hard-earned money if it happens to you.
Don't write off your funds just yet, help is on the way!
If you're ready to talk now, skip the article and click here for a free consultation with our debt specialist.
What to do if you find your bank account is frozen
Banks can freeze accounts for several reasons. Their reason will determine what your next steps are. Below are some common reasons why a bank will freeze your bank account.
The bank suspects suspicious or illegal activity
If the bank thinks you are using your bank account illegally, they can freeze or close an entire account immediately. 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.
A credit card company or a creditor has asked for your account to be frozen
This can happen only after a court judgment. If you did not respond to a court summons, you will need to contact the creditor or their attorney to see if you can work out a payment plan.
The federal or state government has requested your account be frozen for unpaid taxes or child support
This does not require a court judgment to do so. Ask the bank for a reason and then contact the appropriate agency. Always file your federal taxes with the Internal Revenue Service to help prevent a frozen tax refund.
How to Unfreeze Your Bank Account
Your first step is to contact the bank immediately to find out why your account was frozen. If it was suspected of illegal activities, find out how to prove it was not.
If you have a court judgment, the simplest way is to try to work out a payment plan with the creditor for unpaid debts. You can go to court and ask for the judgment to be vacated or work out a payment plan.
If the federal or state government has frozen your account, talk to the appropriate agency. You may need to hire a lawyer to fight a government-ordered freeze.
Tips for Preventing Your Bank Account From Being Frozen
Don't let a frozen bank account leave you feeling panicked and helpless. Be proactive and arm yourself with the knowledge and tools to keep your finances safe and secure.
Our tips will show you how to avoid the nightmare of a frozen account and keep your money flowing smoothly. Learn more about how to avoid a frozen bank account.
Don't Ignore Debt Collectors
A debt collector will take several steps to recover unpaid debts from you. They will send you a letter explaining they plan to take legal action about your unpaid debt. You will then get a court summons for your unpaid debts. If you ignore these, you will end up in court; if you do not show up, you can end up with a frozen account.
Check out this article for a step-by-step guide to dealing with a demand letter and a summons.
Use Direct Deposit for Government Assistance Funds
Bank accounts with direct deposits for government funds are more protected from freezing. The bank must not freeze or exempt income from the last two months of assistance funds.
The following benefits are considered exempt funds:
- Social Security deposits
- Veteran's benefits
- Supplemental Security Income
- Federal Railroad Retirement, unemployment and sickness
- Civil Service Retirement System
- Federal Employee Retirement System
Have a Separate Account for any Direct Deposit of Government Funds
Even better, open a checking account just for your government benefits like Social Security benefits. They are protected if you keep the money separate from other income.
Learn State Exceptions
Each state has exemptions to protect your property. Use these state exemption laws and pay bills with non-exempt funds before using protected deposits. For instance, some states offer protection for head-of-household income, and having a separate account for other funds can protect them from freezing it.
Don't Keep an Account in a Bank that You Owe Money
If you owe money to a bank, open any new accounts at a different bank. Otherwise, the bank can freeze your accounts until they recover the money owed. You should also keep business accounts at a different bank from your personal accounts.
The consequences of frozen bank accounts
A frozen account is not only annoying, but it can also be financially devastating. Below are some of the consequences of a frozen bank account.
- You can not access your money
- Scheduled payments will not clear
- Checks written on the account will bounce
- You will incur non-sufficient funds (NSF) charges and other penalties
- Your credit report may take a hit
- A credit judgment will stay on your credit history for up to seven years
- Illegal use may result in prosecution
- Your debit card will not work
How to get your money back if your bank account is frozen
If your account is frozen, you may want to speak with a lawyer to help clear up your issues. You can ask that the bank lift the freeze and return and fees and penalties that resulted from the freezing.
Alternatives to a frozen bank account
If your account is frozen, you have some alternatives while you try to reverse the freeze.
If you have a check from a local bank, take it to that bank or a branch, and cash it. There is sometimes a fee, and you will need two forms of ID.
Open a new checking account at a different bank. Keep your funds separate!
Your final option is to use a check cashing service. Some retailers will cash computer-generated checks for a small fee. A check cashing company will charge fees based on the size of the check, plus a flat fee.
