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Bank Account Freeze, Explained

Frozen Bank Accounts: How Does It Happen?
Jennifer Calonia
Jennifer CaloniaUpdated April 21, 2023
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A bank or financial institution can use a bank account freeze to block your access to the funds in your account. A bank account may be frozen for a number of reasons, including when an account holder owes money or fraud is suspected. Read on to learn more about frozen bank accounts, the bank account freeze rules, and what to do if your bank account is frozen.

What Are Frozen Bank Accounts?

A frozen bank account, sometimes referred to as a bank attachment or levy, occurs when a temporary hold is placed on an account’s outgoing transactions and withdrawals. It typically results from the account holder owing money to creditors or to the bank itself, but it can also occur when suspicious transactions or activity is spotted by the bank.Although you can still receive direct deposits, you can’t access those funds or make withdrawals. 

How Do Banks Freeze Accounts?

If you have a bank account frozen due to unpaid debt, typically, the creditor must first file a lawsuit against you, and the court must issue a judgment against you. Once a judgment is issued, the creditor can petition for a court order to have the bank freeze your account and the money in the account to recoup the debt under a garnishment.However, some government agencies, like the IRS and the Department of Education, are not required to go through the court system to enforce freezing bank accounts. However, they should give you notice that they plan to garnish your wages.A bank can also freeze bank accounts it deems potentially fraudulent or to have violated the bank’s terms and conditions. For instance, if you write checks for money you know you don’t have, that might violate the bank’s terms and they may place a hold on the account.Recommended: How Many Bank Accounts Can and Should You Have?

What Are the Rules for Freezing a Bank Account?

No creditors, aside from certain government agencies, can put a freeze on your account without undergoing the proper legal steps of first suing you, obtaining a judgment for the debt, and requesting a bank account freeze if it’s not already stated in the judgment. Once a bank receives notice of a court order to freeze a bank account, it is required by law to enact the freeze immediately. The bank isn’t required to tell you about the freeze ahead of time. The creditor isn’t required to give you advanced notice about the bank account freeze either. Although you might not be notified of when the freeze is activated, you should have received a notice with the details of the judgment or garnishment orders. The law protects some specific exempt funds from being withheld from you. A certain amount of funds from Social Security benefit payments, disability benefits, unemployment benefits, Veteran’s benefits, public assistance programs, and child support or alimony are considered exempt from a bank account freeze. Banks typically identify and exclude these funds from a freeze by default, but sometimes errors are made. If you have exempt funds in a frozen account, you can request that the freeze be lifted so you can access those funds. You might need to also contact the creditor or court to exclude these payments from the freeze. Consider speaking to an attorney for further guidance. 

When Can a Bank Account Be Frozen?

A common reason for frozen bank accounts is due to a court-ordered judgment against the account holder. However, there are a few other reasons a frozen bank account might occur.

There’s suspicious or illegal activity on the account

Similar to freezing a credit card for unusual activity, a financial institution can choose to freeze your bank account for unusual and unauthorized activity. Examples include multiple failed login attempts to your online bank account, bounced checks, or a spike in the frequency of transactions or amounts that differ from your typical usage.Banks might also flag and freeze accounts due to potentially illegal activity or activity that goes against the bank’s policy. For instance, suspected money laundering or activity explicitly prohibited by a bank’s terms and conditions can result in frozen bank accounts until a deeper investigation is completed.

You lost your checkbook or debit card

If you’ve lost your checkbook or debit card, you’ll need to request a freeze on your account. Freezing your account in this situation can help you avoid having an unauthorized person write checks against your account or make fraudulent transactions with your debit cardIn the meantime, starting a savings account lets you redirect your automatic deposits that originally went to your checking account so you can retain access to your money during the temporary freeze. If you decide to open a savings account you’ll likely want to find one that gives you the best rate. You can compare high-yield online savings accounts to find one that may work for you.

The account holder died

When the holder of the bank account dies, a bank might implement a freeze on the account until a beneficiary or estate executor provides further direction.

How Long Can a Bank Account Be Frozen?

There are no bank account freeze rules regarding the amount of time an account can remain frozen. For something like a suspected unauthorized transaction, a few minutes over the phone with the bank might be all it takes to unfreeze your account. However, if the situation is more complex, it might take at least seven days for the bank to complete its investigation and make a decision. With complicated issues, its investigation might take up to 30 days. If the frozen bank account is due to a court order, the freeze will remain until you’ve taken the necessary actions required. Recommended: Is It Possible to Write a Check From a Savings Account?

Suspended vs Closed vs Frozen Bank Account

Depending on the reason involved, different actions might be taken to restrict the use of an account. Below is a comparison of common account statuses, including suspended, frozen, and closed bank accounts.
Suspended AccountFrozen AccountClosed Account
Not permanentNot permanentPermanent
Occurs due to insufficient funds, excessive failed login attempts, violation of bank’s terms and conditions, or other unusual activity Occurs due to court order or suspicious activityOccurs due to inactivity, negative account balance, verified fraudulent activity, or violating bank agreement
Restricted access to the accountNew deposits permitted; outbound transactions and withdrawals on holdAccount funds might be returned or seized
Account holder can take actions to lift the suspensionAccount holder can take actions to unfreeze the accountAccount holder might be barred from opening new accounts

How Do You Unfreeze a Bank Account?

If your bank account is frozen, there are a few steps you can take to unfreeze it. First, learn why the account was frozen. Contact your bank and give them your account information, ask what happened, and what you need to do to unfreeze the account. For instance, if a charge you made was flagged as suspicious, you might have to provide confirmation or proof that it is a legitimate transaction.If the frozen account was caused by a bank levy, however, it will likely take longer to unfreeze your account. Make sure to confirm that the freeze was conducted according to law, and that any exempt funds were excluded.If you believe that your bank account shouldn’t be frozen, you can file to vacate the judgment and have it formally removed from your record. However, you’ll need to provide proof and state your case in court. If the judge doesn’t rule in your favor, you’ll need to pay the judgment as specified on the order before the bank freeze is relieved.

The Takeaway

A frozen bank account isn’t a permanent status against your account, but it’s something to address as soon as it happens. If you believe your bank account was frozen in error, contact your bank to resolve the issue. Frozen bank accounts due to a court judgment require specific actions by you to release the hold. Consider speaking to a lawyer to discuss your options, particularly if you have exempt funds in the frozen account that weren’t automatically protected.You may also decide to open a new bank account. If you choose to open a savings account for your funds, Lantern can help you evaluate your options and conveniently open an account all at once. Start saving in a high-interest savings account today.

Frequently Asked Questions

How long can a bank account remain frozen?
What exactly happens when a bank freezes your account?
How could you get a bank to unfreeze an account?
Photo credit: iStock/OlekStock

About the Author

Jennifer Calonia

Jennifer Calonia

Jennifer Calonia is a Los Angeles-based finance writer who has covered the gamut, including student loans, credit card rewards, consumer loans, and debt. Her work has been featured in outlets like Bankrate, NerdWallet, Business Insider, Yahoo Finance, and U.S. News.
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