Can Creditors Freeze Your Bank Account?

A bank account freeze, often called an account levy or garnishment, is a legal action initiated by a creditor or court that restricts access to funds in your bank account. You cannot withdraw money, make transfers, or use outstanding checks. The account’s contents are inaccessible until the creditor’s claim is satisfied or a legal resolution is reached.

When a Bank Account Can Be Frozen

For most private creditors, freezing a bank account requires a court order. This process begins when a debtor falls behind on payments, leading the creditor to file a lawsuit to establish the debt. If the court rules in favor of the creditor, it issues a money judgment.

After obtaining a judgment, the creditor can request a post-judgment collection order, such as a writ of garnishment or execution, which directs the bank to freeze the account. Banks do not initiate freezes for private creditors without this legal directive. Individuals are unlikely to receive advance notice before a freeze, as banks must comply immediately upon receipt of the order.

Creditors With Freezing Authority

Different types of creditors possess varying levels of authority when freezing bank accounts. A judgment creditor, a private entity with a court judgment for unpaid debt, can proceed with a bank levy or garnishment. They must typically follow state-specific procedures to execute the judgment, often involving a writ of execution served to the bank.

In contrast, certain government agencies have statutory authority to freeze accounts or issue levies without first obtaining a court judgment. The Internal Revenue Service (IRS) can levy bank accounts for unpaid federal taxes, as can state tax authorities for state tax debts. Child support enforcement agencies also have the power to freeze accounts for delinquent child support payments without a prior court order. These government entities typically provide notice of their intent to levy before taking action, although they are not required to go through the judicial process that private creditors must. Banks may also freeze accounts due to suspected fraudulent activity or overdrafts, though these are distinct from creditor-initiated freezes for debt collection.

Protected Funds and Exemptions

Not all funds in a bank account are subject to a freeze, even with a valid court order or government levy. Federal law protects certain types of income from garnishment. These protected funds commonly include:
Social Security benefits
Supplemental Security Income (SSI)
Veterans’ benefits
Federal student aid
Unemployment benefits
Some disability payments
Child support or alimony payments

When these federal benefits are directly deposited into a bank account, banks are generally required to automatically protect up to two months’ worth of those deposits from garnishment, with exceptions for certain federal debts like taxes or child support. If funds are commingled, meaning exempt funds are mixed with non-exempt funds, it can become more challenging to prove the source of the exempt money, though the funds retain their protected status. States may also provide additional exemptions beyond federal protections, such as a certain amount of wages or funds from specific public assistance programs.

Responding to a Bank Account Freeze

If you discover your bank account has been frozen, an immediate step is to contact your bank to confirm the freeze and inquire about the entity that initiated it. The bank can provide details on the type of freeze and the amount involved. It is important to obtain and carefully review the court order or levy notice, as this document identifies the creditor, the specific amount claimed, and the legal basis for the freeze.

If the frozen funds include protected income, asserting your right to these exempt funds is a crucial step. This typically involves filing a claim of exemption with the court or the levying agency within a specified timeframe, often ranging from 10 to 20 days after receiving notice of the levy. Providing documentation, such as benefit award letters or pay stubs, is essential to prove the source and exempt nature of the funds. For complex situations, particularly if significant amounts are involved or if exemptions apply, consulting with an attorney specializing in debt collection or consumer law is highly recommended. While engaging legal counsel, it may also be possible to negotiate a payment plan or settlement with the creditor to potentially release the freeze.