What does it mean to have your bank account frozen due to Credit Card debt?
A frozen bank account is a bank account that you are unable to access because your Credit Card issuer / creditor has sent the necessary legal paperwork to the Credit Card issuer showing a debt is owed and this MUST include an actual judgment. A frozen account or restraint is akin to a Court Order and provided the paperwork is correct and legal, your bank has no choice to freeze your bank account.
The “3 Minute Budget”
50% Needs
30% Wants
20% Savings
If your bank account is frozen, you will still be able to put money into it. However, you will not be able to withdraw any money. Usually, banks will put a “hold” or “restrain” on your account when they have received certain legal documents that allegedly prove the debt. Also, it is common practice for a bank hold to be double what is actually owed. Example; you owe $100.00, it is likely your bank will freeze $200.00.
A frozen account can be lifted when a settlement is reached with your Credit Card issuer. A settlement or Stipulation of Settlement is a binding legal contract between you and your creditor. Provided you make the payments pursuant to the contract, your freeze will be removed. Since a lawsuit can be defended, it is likely that a settlement can be reached before the creditor obtains a judgment.
*Please Note: A debt collector or Credit Card issuer CANNOT freeze any bank accounts if they do not hold an actual JUDGEMENT. As stated previously, the bank is only required to place the freeze if it receives the proper legal paperwork and this includes a judgement. Also, it is important to know that a judgment is merely a piece of paper that states you owe $x to entity y. It does not create a situation where your money is sent to the creditor immediately. Rather, with a judgment in hand the Credit Card issuer may begin to search for any assets you own, including your bank accounts. Thus, merely receiving a judgment does not guarantee the creditor will be repaid. It is incumbent on the creditor to FIND your money and assets, AND be legally able to collect upon such assets.
Why does my frozen bank account show a negative balance?
A Credit Card creditor typically puts a hold on your bank account for twice the amount of the judgment against you. This hold will show in your account as a negative balance. This is typical of freezing bank accounts. However, you do not actually owe all of the money frozen to the “judgment creditor.” Rather, the amount you owe is the actual amount of the judgment.
Why did my bank not give me notice before freezing my account?
Unfortunately, pursuant to Debtor Creditor Law, when your bank receives a restraining notice coupled with a judgment, it is legally required to place the freeze on your account immediately, even before notifying you. That is why most people discover their account is frozen when they try to access the now frozen account.
*Please Note: A judgment creditor does not have to give you notice before it freezes your bank account. However, there are two instances where a Credit Card issuer or debt collection company is MUST notify you; (1) That a lawsuit was commenced against you for Credit Card debt and (2) If and when the Credit Card creditor obtains a judgment against you, it is legally required to give you formal notice that it has obtained a judgment against you.
*Please Note: If your first notice of the lawsuit is a frozen bank account, the law holds that you have NOT received proper notice.
What if my frozen bank account contains funds that are exempt from debt collection?
If all or even some funds in your bank account are legally exempt from attachment and freezes, the Credit Card must release the hold on your account immediately, even if it has a judgment against you.
If your bank account has been frozen or money removed due to a Credit Card debt, act immediately, contact a Credit Card debt settlement attorney for assistance. There are many laws that can protect you and your bank accounts. Be sure to raise all defenses and cross reference your specific case facts to the laws governing Credit Card debt, wage garnishment and frozen bank accounts.
