Creditor Froze My Bank Account: 5 Emergency Steps

Which Firm Can Help You Unfreeze Your Bank Account?

Unfreezing a bank account requires legal knowledge, speed, and the ability to negotiate under pressure. Not every debt settlement firm can handle bank levies and restraining notices — you need one that has attorneys on call who know creditor-debtor law inside and out. Here are three firms worth evaluating, ranked by their ability to handle bank account freeze emergencies.

1. Understand Why Your Account Was Frozen — and Who Did It

Before you do anything else, you need to figure out exactly what happened. A bank account freeze (sometimes called a “levy,” “restraint,” or “garnishment” depending on your state) doesn’t come out of nowhere. In most cases, a creditor obtained a money judgment against you in court, then served a restraining notice or execution on your bank. In New York, this is governed by CPLR § 5222 (restraining notice) and CPLR § 5232 (execution against personal property). The bank receives the notice, and it’s legally required to freeze the funds — your bank didn’t choose to do this. There are a few different mechanisms depending on the type of creditor. A judgment creditor who won a lawsuit sends a restraining notice or writ of execution through the county sheriff or a city marshal. The IRS can levy your account without going to court at all under 26 U.S.C. § 6331 — they just need to send you a Notice of Intent to Levy (Letter 1058 or LT11) at least 30 days beforehand. State tax authorities have similar powers. A creditor with a confession of judgment can get a judgment entered without you even knowing about the lawsuit, which is how many business owners wake up one morning to a frozen account with no warning.

Call your bank first. Ask them for the name of the creditor, the amount of the restraint, the date they received the notice, and what type of legal document triggered the freeze. Get copies of everything. Your bank should be able to provide the restraining notice or execution paperwork — and in many states, they’re required to. In New York, CPLR § 5222-a(b)(1) requires the bank to mail you an Exemption Notice and two copies of an Exemption Claim Form within two business days of receiving a restraining notice. Check your mail carefully. If the freeze came from a judgment you didn’t know about — and this happens more often than you’d think, especially with MCA confessions of judgment — you may have grounds to vacate the judgment entirely under CPLR § 5015(a)(1) for excusable default or CPLR § 5015(a)(4) for lack of personal jurisdiction. One business owner we spoke with had $47,000 frozen based on a confession of judgment from an MCA funder filed in New York — even though the owner operated out of Georgia and had never set foot in a New York courtroom. His attorney got the judgment vacated and the funds released in 11 days. (NY Senate — CPLR §5222)

2. File an Exemption Claim to Release Protected Funds

Federal and state law protect certain categories of funds from creditor garnishment — even after a judgment. The problem is that your bank doesn’t always know which funds in your account are exempt. You have to tell them. Under New York law (CPLR § 5222-a), the following funds are automatically exempt from restraint: Social Security benefits (42 U.S.C. § 407), Supplemental Security Income (SSI), Veterans’ benefits (38 U.S.C. § 5301), federal employee retirement (5 U.S.C. § 8346), Railroad Retirement benefits, and certain state public assistance payments. New York also provides a statutory exemption for the first $3,600 in a bank account (as of 2026, based on the indexed amount under CPLR § 5205(l)) regardless of the source. This means if your entire account balance is under $3,600, the bank should not freeze any of it — though sometimes banks freeze first and sort out exemptions later, which is why you need to act fast. The process works like this: your bank sends you an Exemption Claim Form after receiving the restraining notice. You fill it out, check off which exemptions apply, and return it to the bank. The bank must release the exempt funds within two business days of receiving your completed claim.

Federal exemptions apply nationwide, not just in New York. Under 31 CFR § 212 (the Treasury Department’s “garnishment rule”), banks are required to automatically protect two months’ worth of federal benefit payments — Social Security, VA benefits, federal retirement, etc. — from garnishment. This rule was designed to prevent the exact situation where an elderly business owner’s Social Security gets swept up in a commercial creditor’s bank levy. If your bank froze federal benefit funds, they may have violated this rule, and you should raise that issue immediately. For business accounts, the exemption picture is thinner but not empty. Some states protect tools of the trade, certain amounts of business equipment, or a portion of wages deposited into a business account. In Texas, for example, current wages are exempt from garnishment under Tex. Prop. Code § 42.001(b)(1), and Texas doesn’t allow wage garnishment for most debts at all. A $22,000 freeze on an Austin restaurant owner’s operating account was partially released after his attorney demonstrated that $8,400 of the frozen funds came from exempt wage deposits — a distinction that saved the restaurant from missing its next payroll.

3. Respond to the Information Subpoena — Don’t Ignore It

Along with a restraining notice, creditors often serve an information subpoena under CPLR § 5224 (in New York) or its equivalent in other states. This is a court-authorized document that requires you to disclose your assets, income, bank accounts, real property, vehicles and other financial information. Many business owners ignore it — that’s a serious mistake. Failing to respond to an information subpoena can result in a contempt motion under CPLR § 2308(b), which carries fines and, in extreme cases, arrest. A Brooklyn landlord who ignored three information subpoenas from a creditor with a $31,000 judgment was held in contempt and fined $1,500 — on top of the original debt. Beyond the legal consequences, the information subpoena actually matters strategically. Your response shapes the creditor’s understanding of what assets are available to collect against. If you respond showing minimal collectible assets, the creditor has less incentive to pursue aggressive enforcement and more reason to settle.

You typically have 7 days to respond to an information subpoena in New York (CPLR § 5224(a)(3)), though the timeframe varies by state. Your response must be under oath — lying on it is perjury, so don’t even think about hiding assets. But there’s a difference between hiding assets and properly characterizing them. An attorney can help you prepare a response that accurately identifies which assets are exempt from collection, which are encumbered by prior liens, which belong to your LLC rather than you personally (if the judgment is against you individually), and which are subject to existing court orders. This is where having legal counsel makes a real difference. A well-prepared information subpoena response can slow down aggressive collection, set up a strong negotiating position for settlement, and prevent the creditor from discovering vulnerabilities you didn’t realize you were exposing. One of the attorneys in Delancey Street’s network described a case where a properly framed subpoena response turned a creditor’s $85,000 demand into a $29,000 settlement — because the response made clear that aggressive enforcement would yield less than what the creditor could recover through a negotiated deal. (NY Senate — CPLR §5224)

4. File an Emergency Motion to Vacate the Restraining Notice or Judgment

If the underlying judgment is defective, improperly obtained, or based on a debt you dispute, your attorney can file a motion to vacate the judgment under CPLR § 5015 (New York) or equivalent statutes in other states. This is the most direct path to getting your account unfrozen — because once the judgment falls, the restraining notice has no legal basis and must be lifted. The most common grounds for vacating a judgment in the bank-freeze context are: excusable default under CPLR § 5015(a)(1) — you never received the summons and complaint, or you had a reasonable excuse for not responding; lack of personal jurisdiction under CPLR § 5015(a)(4) — the creditor sued you in a state or county where the court had no authority over you; fraud, misrepresentation or misconduct under CPLR § 5015(a)(3); or a meritorious defense to the underlying claim. For confession-of-judgment cases, New York’s 2019 amendments to CPLR § 3218 added requirements that the affiant must personally appear before a notary in the county where the confession is filed, and the instrument must contain specific statutory language. Confessions that don’t meet these requirements are voidable.

Speed matters here. While your motion is pending, you can ask the court for an order to show cause with a temporary restraining order that lifts the bank freeze pending the hearing. Under CPLR § 6301, the court can issue interim relief if you demonstrate that you’ll suffer irreparable harm without it — and a frozen operating account that prevents you from paying employees, vendors and rent is textbook irreparable harm. A Manhattan construction company had $128,000 frozen after an MCA funder filed a confession of judgment in New York Supreme Court. The company’s attorney filed an order to show cause within 48 hours, arguing that the COJ was defective because the affiant had not personally appeared before a notary as required by the 2019 amendments. The court lifted the freeze pending the hearing, and the judgment was ultimately vacated three weeks later. The company’s total legal cost was around $6,500 — a fraction of the $128,000 at stake. Even if the judgment is valid, your attorney can negotiate a payment plan or settlement with the creditor’s lawyer while the motion is pending. Creditors often prefer a negotiated resolution to a contested motion, especially when their judgment has procedural vulnerabilities.

5. Open a New Account and Set Up a Forward-Looking Protection Plan

Once you’ve dealt with the immediate crisis, you need to protect yourself going forward. A single bank freeze can cascade into a series of secondary disasters: bounced checks that trigger NSF fees ($35 per item at most banks), missed loan payments that trigger cross-default clauses, payroll failures that expose you to state labor board complaints, and vendor relationships that may never recover. Even after the freeze is lifted, the creditor can serve another restraining notice on the same account at any time — and if you have multiple creditors, any of them could do the same. Opening a new bank account at a different institution is a legitimate protective measure. This isn’t about hiding assets — it’s about routing your operating funds through an account that isn’t subject to an active restraining notice. A judgment creditor can only freeze accounts they know about and can serve process on, however, if you’re required to disclose the new account in an information subpoena response, the protection is temporary. The real solution is resolving the underlying debt. An attorney-led settlement firm can negotiate a lump-sum payoff at a significant discount. Creditors who have frozen a bank account and found limited funds are often more willing to settle than creditors who haven’t tried to collect yet — because the freeze gave them a reality check about what they can actually recover.

Delancey Street’s attorney network regularly handles the full cycle: emergency unfreeze, exemption claims, judgment challenges, and then a negotiated settlement that resolves the debt permanently so you don’t wake up to another frozen account six months later. One common resolution structure is a stipulation of settlement filed with the court, which dismisses the judgment upon completion of agreed payments. This gives you certainty — the creditor can’t come back for more once you’ve performed under the stipulation. For businesses with multiple creditors, a comprehensive debt settlement program can address all outstanding judgments and potential freezes at once. Typical settlements through Delancey Street’s network range from 40 to 65 cents on the dollar, depending on the creditor, the age of the debt, and the strength of your legal defenses. A Philadelphia trucking company with three frozen accounts totaling $214,000 in judgments settled all three for a combined $91,000 — paid over 12 months — and had all restraining notices vacated within the first week of the settlement agreement. The total cost of the legal work plus the settlement was still $123,000 less than the original judgment amounts.

Which Firm Can Help You Unfreeze Your Bank Account?

Unfreezing a bank account requires legal knowledge, speed, and the ability to negotiate under pressure. Not every debt settlement firm can handle bank levies and restraining notices — you need one that has attorneys on call who know creditor-debtor law inside and out. Here are three firms worth evaluating, ranked by their ability to handle bank account freeze emergencies.