Frozen Bank Accounts
A frozen bank account is an account that cannot be used for any purpose such as withdrawal of money, money transfers or bill paying services. Bank accounts are frozen or attached by creditors who get a judgment against the account holder to get the money owed to the creditor. If the consumer cannot pay or take steps to pay, the creditor can tell the bank to freeze the account. State and federal authorities can freeze an account without a judgment if the consumer fails to pay back taxes or child support. Since the creditor got a court judgment to freeze the account, it's in the consumer's best interest to contact a NYC Bankruptcy law firm to help the consumer get out of this difficult financial situation.
How It Works
When a creditor requests your bank to freeze your account, it may be fully or partially blocked. If the amount that is in the attachment order is more than the amount that is in your account, your whole account will be frozen. The creditor has the right to freeze your account for double the amount you owe according to the judgment. If this amount is less than the amount in your account, it will only be partially frozen.
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If your paychecks are electronically deposited, they will also be frozen if the entire account is frozen. If this is the case, you need to contact your employer and stop the electronic deposits. Unfortunately, you will not receive any advanced notice that your account is going to be frozen. Your bank is required to notify you, but by the time you get the notification, your account will already be frozen.
The notice sent by the bank must explain your right to object to the attachment and should list exemptions that would allow you to get your money. There will be deadlines for challenging the attachment and identifying the creditor and his or her reasons for freezing your account.
Once creditors have a judgment against you, they have many more ways to collect on the debt than creditors who don't have a judgment. They can take a portion of your net wages as well as money from other deposit accounts and valuable personal property such as your car, jewelry and antiques. However, they can't take everything. You and your family still need to eat, buy clothes and have a home. In fact, the fewer possessions you have, the less the creditor will be able to take.
Some Common Ways of Collecting Judgments
Wage attachment or wage garnishment can be done if you receive a regular paycheck. Your employer will subtract a portion and give it to your creditor before you get your salary. The amount your employer takes will depend on the type of debt you have. For regular debt, it is up to 25 percent according to federal law. For child support debt, it may be up to 50 percent. If you owe back income taxes, the IRS may take nearly all of your wages. A NYC Bankruptcy lawyer may be able to help reduce these garnishments.
Steps You Can Take
You may not have a lot of options for getting your account unfrozen. The first step is to contact the creditor or his or her lawyer and ask if they will unfreeze your account. You'll need to give them a good reason to do this. If the attachment is from the government, they will usually work with you to arrange a payment schedule for you to pay your debt. If a private creditor refuses, your best option is to contact an NYC Bankruptcy lawyer, because you're going to need to go to court. Most people get a better result by going to court than those who try to settle out of court.
There are certain funds that are exempt from attachment if the balance is less than $2,625 in your account, and your lawyer may be able to release exempt funds if you have any. These include directly deposited:
- Social Security
- Veteran's benefits
- Disability
- Pensions
- Spousal maintenance
- Child support
- Worker's compensation
- Several more
There are also federal rules that protect federal benefits. This is where it starts to get complicated, and you may require legal help. However, if your account only contains exempted funds, the creditor is required to release your account, which is also called vacating the judgment.
To get your bank account unfrozen, you need to file an Order to Show Cause. An experienced NYC Bankruptcy lawyer will:
- Find out the right court and index number to file the papers
- Fill out the Order to Show Cause forms and file them with the court clerk. Your lawyer will tell you which documents are required to attach to the Order to Show Cause forms.
- Get the forms approved by a judge. After getting approval, you'll get a court date.
The creditor may try to negotiate a settlement with you for regular payments. This may not be in your best interest, which is why it's better to have your lawyer conduct any settlement negotiations.
If your bank account has been frozen due to a judgment against you, it's crucial to seek the help of an experienced NYC Bankruptcy attorney. At Spodek Law Group P.C., our knowledgeable lawyers can guide you through the process of unfreezing your account, protect your rights, and help you find the best path forward in your financial situation. Contact us today for a consultation