The Definition Of A Frozen Bank Account

The Definition Of A Frozen Bank Account

2019/02/25

An individual may hold a bank account for various purposes. One of the objectives of holding a bank account is to keep money at a secure location. There are situations where an individual may not have made payments due to third parties.

In such situations, creditors or debt collectors can obtain a court order to access the funds available in the defaulter’s bank account. Once such an order has been passed by the court, account holder cannot withdraw any funds from his/her bank account. However, he/she can deposit money in such a bank account. In the absence of any court order, a creditor or a debt collector cannot claim access to an individual’s bank account.

Banks are required to freeze an account immediately on receipt of restraining order from the court. An account holder may not come to know immediately that his/her account has been frozen. For Instance, an account holder is trying to withdraw some money from his/her bank account and cashier refuses to give cash. On further inquiry, account holder comes to know that his/her account has been frozen. Similarly there can be a situation where account holder has issued a check in favor of a third party in respect of any purchases. Since account has already been frozen, this check will be dishonored by the bank.

How will Account Holder come to know that the account has been Frozen?

Even though an individual whose bank account has been frozen will not receive any kind of notification from the court, the creditor or debt collector who has filed the lawsuit to obtain a restraining order will have to notify the account holder on two important things. One would be to inform the account holder that a lawsuit has been filed against him/her. Second would be to inform the account holder that a judgment has been obtained against him/her.

In what situations a Creditor or Debt Collector will not get Access to Funds?

A bank account will not be subject to a restraining order in case of an account that has a balance of less than $ 2,500 and contains directly deposited exempt benefits such as retirement benefits, social security benefit, workers compensation and so on.  In case of any other account, if account balance is less than $ 1,740, a creditor will have not be able to access the funds available in the bank account.

How can a Court Order on a Bank Account be Lifted?

An individual whose bank account contains non exempted funds and whose account has been frozen can directly go to the court.  In case account contains exempted funds, account holder can call the attorney of the judgment creditor and provide relevant information to substantiate the fact that the bank account contains only exempted funds.

Even though some mechanisms are available to the account holder which can help him/her to lift the restraining order, every possible effort should be made to clear the dues in time. In case sufficient funds are not available for making payment to the creditor, individual should try to negotiate the terms with the creditor or debt collector.

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