Chloe Meltzer | October 19, 2022
Summary: Has your bank account been frozen? Here's SoloSuit's guide on 3 possible reasons why and how to unfreeze it.
>>Read the NPR story on SoloSuit
If you have overdue debts, you may suddenly realize that your bank accounts have been frozen. This is only after a default judgment has been awarded against you to a creditor or debt collector to whom you owe money.
If it has gone this far, then a creditor or debt collector may be awarded a bank account levy, attachment, or garnishment. This allows them to withdraw money from your account to pay off your debts, but it also means that you cannot access your account while it is frozen. Outstanding checks won't clear either, and you will not be able to make transfers. If you attempt to do any of these things, you may receive fees for having non-sufficient funds in your account.
Understanding the reason why your account is frozen, and how to stop it, might be essential to your financial situation.
If a creditor files a lawsuit and is awarded a judgment against you, then they often are given the right to freeze your bank account. If the creditor wins the suit against you, then they are often awarded a “money judgment” which forces you to pay a certain amount owed.
If you do not pay the judgment or pay on the schedule that you agreed to, the creditor may then request for your bank to freeze your account and satisfy your debt. This is then referred to as a garnishment.
It is good to note that federal agencies, such as the Internal Revenue Service (IRS) or the U.S. Department of Education, do not need a judgment to garnish. As long as they have given you notice of intent to garnish or levy, they can do so. The same can be said for child support.
When your account is frozen, it means that your funds are inaccessible. You will most likely be unable to access your funds until your debt is paid back, or until you are able to have the freeze removed. You cannot take money out of your accounts, and any payments will not go through.
You may notice that the bank has frozen your account because a check will bounce back if you have written or cashed a bad check. This will be treated as though you do not have enough money in your account and may even be flagged as fraud. If you have payments that try to go through, the payments will bounce and you may end up paying a charge for not having sufficient funds. This happens regardless of if you have funds in your account or not, because such funds will not be accessible.
If a creditor seeks judgment against you, then you should expect your credit score to go down. The judgment will also stay on your credit report for up to seven years. This can hurt you in the future if you attempt to buy a home, get a loan, and even get an apartment.
If your account seems to have suspicious or illegal activity, a bank is allowed to freeze an account. This is specifically if they believe one of their account holders has been conducting illegal activities. Bankers became more strict after the events of September 11, 2001 due to certain criminal enterprises that have used financial institutions to conduct business over the years. It is common for banks to monitor accounts for money laundering anyway, which is when large amounts of money are deposited into bank accounts to seem legitimate.
If your bank has suspected that you used your account illegally, they can also close your account without any notice. It can also prevent you from doing business in the future. If, however, you are not doing an illegal activity, then you should contact your bank immediately to clear this up and remove the freeze.
If you have unpaid debts, your creditors may be able to get the bank to freeze your account. They would then be able to go into your account and pull money to pay off your debt. They must first get approval from the courts by getting a judgment against you. The judgment would then be sent to the bank, and they would have this on file.
It is also important to be aware that if you have a defaulted loan at the same institution as your bank account, the lender can access your account to pay the defaulted loan without obtaining a judgment. You agree to this when you sign the loan.
If you owe student loans or taxes to the government, you might find your bank account automatically frozen by the Internal Revenue Service (IRS). They can issue a tax levy for any unpaid taxes, which will not be lifted until the debt is fully paid.
The government can do a few different things for unpaid student loans. They can either take your tax refund or garnish your wages. Garnishing wages is more common without pursuing a judgment from the courts.
However, even if your bank account is frozen because of debt collectors, your bank cannot be wiped completely. There are laws that govern how much can be garnished based on the state you live in. Additionally, there is a limit to what type of income can be taken from you. For example, in certain states, it is illegal for creditors to withdraw Social Security benefits, child support, or workers' compensation. When your account is frozen, you will need to file a claim of exemption within 10 days.
When your bank account is frozen, you may have automatic deposits that you can no longer access. The issue with a frozen bank account is that it will allow those deposits to go in, but you will not be able to get them out. This means you will be risking all of your new money as well. So, if your account is frozen, you should stop direct deposits so that you can have access to your money.
When you receive a notice of a bank levy, you will also be given information that includes your rights, how to object to having your funds frozen, and who the creditor is. If you wish to challenge the levy, there are a few things you can do.
First, you should check the statute of limitations on the debt, which is the legal time period that a creditor has to sue someone for debt. The statute of limitations is different in every state. If the debt is within the time limit, you can try reaching out to the creditor to negotiate a payment plan. Many creditors and debt collectors are willing to work with you if you're in a financial bind.
Finally, you can turn to legal means to fight the bank levy. If you never heard about the lawsuit, and therefore lost by default, you can try filing a Motion to Set Aside Judgment (also known as a Motion to Vacate Judgment). This type of motion asks the court to void the judgment and gives you time to respond to the lawsuit. This can stop bank levies in their tracks. .
Let's consider an example.
Example: Marcos tries to withdraw some money from his bank account in California, and he is told that his funds have been frozen. He does some investigating and finds out that he was sued for an old credit card debt, did not respond in time, and lost by default. The creditor is now coming after his account to get the funds back. Marcos finds out that you have 180 days to file a Motion to Vacate Judgment in California to reverse the court's decision. He uses SoloSuit to create the motion document and submits it to the court. The court accepts his motion, and Marcos is free to properly respond to the lawsuit and access his bank account again.
There are steps that you can take in order to avoid having your bank account frozen or to attempt to have your funds released if they have been frozen.
If you want to avoid having your bank accounts frozen, then it is important to always respond to debt collectors. The goal would be to pay off your debts, if possible, but if this is not possible, then you can attempt to settle the debt. Usually, you would settle the debt by paying a lump sum for less than owed or agree to a payment plan. In many cases, especially government entities, if you ask for the attachment to be released after scheduling a payment plan, they will comply. You can always contact the creditor to see if you can make a deal.
There are laws in place which require banks to review anyone who is subject to a frozen account. If you have government benefits, such as social security, that are deposited directly into your account, that money cannot be frozen.
Additionally, any money from your benefits deposited within two months prior to the garnishment cannot be frozen either. The bank is required to make sure that you have at least two months worth of Social Security benefits in your account available. The only exception is for past-due child support and federal taxes.
If your Social Security deposits are mixed in with other funds, or you have more than two months of deposits in the same account then some of your funds can be frozen.
There are also some funds that are exempt from being frozen due to specific state laws. If these funds are frozen, you can file a paper with the court explaining the specific exemption, and why you believe you qualify for the exemption. You will also need to request a court hearing where you will have to ask for them to lift the freeze on your funds. Funds that are exempt from garnishment include the following:
The best way to avoid garnishment or bank levies is to respond to a debt lawsuit as soon as you receive notice of it. Most Americans do not know how to respond to debt lawsuits, so they ignore them, and this leads to a default judgment against them. The default judgment gives the debt collector or creditor the right to garnish wages, freeze bank accounts, and seize property. You can avoid a frozen bank account by filing a written Answer to the lawsuit in court.
Here are 3 most steps to respond to a debt lawsuit:
Check out this video to learn more about each step:
SoloSuit makes it easy to respond to a debt collection lawsuit.
How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
You can ask your questions on the SoloSuit forum and the community will help you out. Whether you need help now or are just looking for support, we're here for you.
>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate
Here's a list of guides for other states.
Being sued by a different debt collector? Were making guides on how to beat each one.
Is your credit card company suing you? Learn how you can beat each one.
Going to Court for Credit Card Debt — Key Tips
How to Negotiate Credit Card Debts
How to Settle a Credit Card Debt Lawsuit — Ultimate Guide
Need more info on statutes of limitations? Read our 50-state guide.
Why do debt collectors block their phone numbers?
How long do debt collectors take to respond to debt validation letters?
What are the biggest debt collector companies in the US?
Is Zombie Debt Still a Problem in 2019?
If a car is repossessed, do I still owe the debt?
Is Portfolio Recovery Associates Legit?
Is There a Judgment Against Me Without my Knowledge?
Should I File Bankruptcy Before or After a Judgment?
What is a default judgment?— What do I do?
Summoned to Court for Medical Bills — What Do I Do?
What Happens If Someone Sues You and You Have No Money?
What Happens If You Never Answer Debt Collectors?
What Happens When a Debt Is Sold to a Collection Agency
What is a Stipulated Judgment?
What is the Deadline for a Defendants Answer to Avoid a Default Judgment?
Can a Judgement Creditor Take my Car?
Can I Settle a Debt After Being Served?
Can You Appeal a Default Judgement?
Do I Need a Debt Collection Defense Attorney?
Do I Need a Payday Loans Lawyer?
Do student loans go away after 7 years? — Student Loan Debt Guide
Am I Responsible for My Spouses Medical Debt?
Should I Marry Someone With Debt?
Can a Debt Collector Leave a Voicemail?
How Does Debt Assignment Work?
What Happens If a Defendant Does Not Pay a Judgment?
How Does Debt Assignment Work?
Can You Serve Someone with a Collections Lawsuit at Their Work?
How Many Times Can a Judgment be Renewed in Oklahoma?
Does Debt Consolidation Have Risks?
What Happens If You Avoid Getting Served Court Papers?
Does Student Debt Die With You?
Can Debt Collectors Call You at Work in Texas?
How Much Do You Have to Be in Debt to File for Chapter 7?
What Is the Statute of Limitations on Debt in Washington?
How Long Does a Judgment Last?
Can Private Disability Payments Be Garnished?
Can Debt Collectors Call From Local Numbers?
Does the Fair Credit Reporting Act Work in Florida?
The Truth: Should You Never Pay a Debt Collection Agency?
Should You Communicate with a Debt Collector in Writing or by Telephone?
What Happens After a Motion for Default Is Filed?
Can a Process Server Leave a Summons Taped to My Door?
Need help managing your finances? Check out these resources.
How to Make a Debt Validation Letter - The Ultimate Guide
How to Make a Motion to Compel Arbitration Without an Attorney
How to Stop Wage Garnishment — Everything You Need to Know
How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)
Defending Yourself in Court Against a Debt Collector
Tips on you can to file an FDCPA lawsuit against a debt collection agency
Advice on how to answer a summons for debt collection.
Effective strategies for how to get back on track after a debt lawsuit
New Hampshire Statute of Limitations on Debt
Sample Cease and Desist Letter Against Debt Collectors
The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah
West Virginia Statute of Limitations on Debt
What debt collectors cannot do — FDCPA explained
Defending Yourself in Court Against Debt Collector
Arkansas Statute of Limitations on Debt
Youre Drowning in Debt — Heres How to Swim
Help! Im Being Sued by My Debt Collector
How to Make a Motion to Vacate Judgment
How to Answer Summons for Debt Collection in Vermont
North Dakota Statute of Limitations on Debt
ClearPoint Debt Management Review
Indiana Statute of Limitations on Debt
Oregon Eviction Laws - What They Say
CuraDebt Debt Settlement Review
How to Write a Re-Aging Debt Letter
How to Appear in Court by Phone
How to Use the Doctrine of Unclean Hands
Debt Consolidation in Eugene, Oregon
Summoned to Court for Medical Bills? What to Do Next
How to Make a Debt Settlement Agreement
Received a 3-Day Eviction Notice? Heres What to Do
How to Answer a Lawsuit for Debt Collection
Tips for Leaving the Country With Unpaid Credit Card Debt
Kansas Statute of Limitations on Debt Collection
How to File in Small Claims Court in Iowa
How to File a Civil Answer in Kings County Supreme Court
Roseland Associates Debt Consolidation Review
Do Debt Collectors Ever Give Up?
Can They Garnish Your Wages for Credit Card Debt?
How Often Do Credit Card Companies Sue for Non-Payment?
How Long Does a Judgement Last?
How Long Before a Creditor Can Garnish Wages?
How to Beat a Bill Collector in Court