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It’s easy to lose track of your debts. Small bills get ignored or put off, you find yourself in a tight spot financially, or you simply forget to mail in your check.
Regardless of the why, these slip-ups can result in a frozen bank account. Often you won’t even receive a warning, leaving you no time to plan for a bank freeze.
This can leave you stressed, confused, and without access to the funds, you need for everyday expenses when it hits.
The first step to dealing with a frozen bank account is understanding what it is and why it happens. This article will help you navigate this unforeseen stressor so you can clear it up and gain access to your finances again.
What Is a Frozen Bank Account?
Simply put, a frozen bank account is when the bank puts a complete hold on your bank account. If your account is frozen, you won’t be able to withdraw cash, write checks, or use debit cards linked to the account.
Money can almost always still go into a frozen account; it just can’t come back out.
What Happens When a Bank Account is Frozen?
When your account is frozen, the bank will bar any debits to the account. You won’t be able to make purchases or withdraw any money while the freeze is in effect.
Bank freezes can be highly frustrating for this reason. If you rely solely on your checking account to pay for things like transportation and groceries, a bank freeze leaves you high and dry.
If you have direct depositsset up, the money going into your account will still deposit. That said, you won’t be able to access this money till the freeze has subsided.
Your frozen account will be unfrozen whenever you have paid off the debt that resulted in the freeze or once your account is no longer under suspicion of fraudulent activity.
Why Would a Bank Account be Frozen?
#1. You Owe Money to the Government
If you have unpaid taxes or are indebted to the government for some other reason, this can be grounds for a bank account freeze.
If this is the cause of your freeze, the government will deliver your bank a judgment against you. Once they’ve received this judgment, the bank will bar you from using your account until you’ve paid the government what you owe them.
You can attempt to remove the judgment, but if it’s a government debt you owe, the odds of this working out in your favor are highly unlikely.
#2. You Owe Money to a Creditor
If you owe a creditor money, they can follow similar proceedings to prove you are indebted. Once they’ve received a judgment in their favor, they can deliver it to your bank to have your account frozen.
The result is the same as if you were indebted to the government. You won’t be able to access your funds until you’ve paid the creditor what they are owed.
That said, if you believe there’s been a mistake, the outlook with a creditor is a bit more optimistic. You may want to start by reaching out to the creditor directly to try to clear the issue. If that doesn’t work, you can take the matter back to court.
#3. Fraudulent Transaction Detected
Sometimes the bank will freeze your account to try to protect you. If they notice suspicious behavior like a purchase made in an unusual and far away town, they may freeze your account themselves.
This kind of freeze can prevent someone with your account information from financially ruining you.
If this is the reason for your freeze, you’ll often get a notification from your bank alerting you of suspicious activity.
From there, you can work with the bank to change your information or block fraudulent activities and unfreeze your account once these safety measures are in place.
#4. Convicted of a Crime
Those who have been proven guilty of certain crimes will have their accounts frozen. This occurs primarily to avoid funds being used for nefarious activities.
Obviously, this bars the convicted person from accessing their finances, but it can also affect others.
If the convicted person holds a joint account, that account may be frozen, leaving the other joint account holder without access to their funds.
This kind of freeze only tends to happen when the convicted person has committed a more serious crime. Minor offenses rarely result in bank holds.
#5. Lost Debit Card
If you suddenly find yourself without your debit card, you can order a freeze on your account to prevent someone from spending your money. This is typically done either online or by phone and should be done as fast as possible.
The account will be unfrozen once the bank has canceled your card and ordered you a new one.
#6. Freeriding in Your Investment Account
Freeriding is the practice of buying and selling shares without actually having the cash to make the purchases. It’s like gambling with money you don’t have in the hopes that you’ll win big.
If you attempt to freeride in your own account and are caught, your online bank account will be frozen until you pay up for the shares you’ve purchased.
#7. The Sole Account Owner Passed Away
Finally, if the account owner dies, the bank will frequently freeze the account. The only way to get the account unfrozen in most instances is for the estate executor to provide proof of inheritance.
Frozen Bank Accounts and Federal Benefits
If you receive federal benefits such as disability payments, the bank is legally required to keep two months of these payments unfrozen. In other words, you will have access to two months of your benefits regardless of your bank freeze.
That said, you won’t be able to use your typical account to access these funds. Instead, the bank will issue you a prepaid card or set you up with a different checking account.
These funds only qualify if they are deposited directly into your account. If you attempt to deposit them through any other means, they will be included in the freeze.
How Long Can a Bank Account be Frozen?
Typically, a bank account freeze lasts for three weeks. That said, they can remain in place for longer if the cause is an outstanding debt. In this case, the freeze will remain until you’ve met the creditor’s conditions.
How Do You Know If Your Account is Frozen?
You’ll typically get a notice from the bank. If you miss this notice, you’ll know your account is frozen because your card will be declined when attempting to make purchases despite having sufficient funds in your account. The same will happen if you try to withdraw cash.
How Do I Unfreeze My Bank Account?
The answer depends on the cause of the freeze.
For debt-related freezes, you’ll need to meet the creditor’s terms before accessing your account again. These terms can vary but often involve paying off a certain amount of the debt.
You simply need to work with your bank to ensure your account’s security for freezes related to lost cards or suspected fraud.
If you have been convicted of a crime, the government controls the freeze and will decide when to end it.
Bottom Line: Frozen Bank Accounts
If you’re staring down the barrel of a frozen bank account, your first step is to identify the why. Don’t despair immediately, as it could simply be the bank looking out for your security.
If it turns out to be because of debt, find out who you owe and why and make a plan to pay them what they need so you can access your account again.
The best bank freeze is no bank freeze, so manage your debts wisely and be careful with your bank information.