Why a Bank Account Could be Frozen and How to Deal With It

If your bank account ever gets frozen, don’t panic—you can take steps to get back on track. The first thing to do is figure out what happened so you can fix it. 

Sometimes, a quick call to your bank is all it takes. Other times, you might need a little extra help, like working with a debt relief company to settle debts. Either way, there’s a path forward, and you can regain control of your money. Let’s explore what you can do if a frozen bank account happens to you.

What Is a Frozen Bank Account?

A frozen bank account can also be called a locked account. Essentially, the bank blocks your ability to use the money in your account. You should still be able to log into online or mobile banking and view your account balances. You may still be able to make deposits as well. 

You might not be able to:

• Schedule ACH bill payments

• Transfer funds to another account

• Withdraw cash at ATMs

• Purchase certified checks using your account funds

• Close the account

If you have any automated withdrawals set up, those might not go through. For example, if you pay bills through your bank's online bill pay service, previously scheduled payments might not process as long as your account is frozen. You'll have to use other payment methods, like a different bank account, while you work to resolve your frozen bank account issue.

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7 Reasons Why Your Bank Account Might be Frozen

Here are seven scenarios that could result in a frozen bank account. 

1. Suspicious activity

Your bank might freeze your account temporarily if it spots a pattern of unusual or suspicious activity. For example, multiple failed login attempts could be a tip-off that someone other than you is trying to access your accounts. In that case, the bank might freeze your account to protect your money and contact you to request identity verification. 

Depending on your bank's security policies, that contact might come via phone call, email, or text. If you're unsure whether the contact is legitimate, reach out to the bank yourself by stopping in at a local branch or looking its phone number or email up online. Avoid using phone numbers and emails provided in the initial communication about your locked account until you're sure they're real.

If you'd like to avoid these types of freezes in the future, ask if your bank offers account alerts. This might enable you to approve or deny transactions as they happen, allowing you to avoid being the victim of fraud or having your account frozen just because you made a purchase that's outside your ordinary spending habits.

2. Fraud

Fraudulent transactions are unauthorized transactions another person makes to try to steal money from you. If your bank believes that a debit card purchase, withdrawal, ACH transfer, or wire transfer is the result of fraud, it might block your account to prevent any other transactions from going through. For example, it might assume fraud if the transaction takes place in a place you don't normally shop, particularly if the transaction is large. 

That's a good thing, because a frozen bank account could limit your liability for losses. The number or dollar amount of fraudulent transactions you could be held liable for depends on how quickly you report them to the bank. Reaching out to the bank promptly after receiving a fraud alert could help you protect your money and unlock your account faster.

It's not always possible to avoid fraud, but you could reduce your risk by keeping your bank account information private. Never access your bank account on public WiFi networks, and never share your passwords with anyone. Also, monitor your accounts for transactions you don't recognize.

3. Unpaid debts

Falling behind on debts could lead to your bank account being frozen or levied. A bank account levy is also called an attachment or bank account garnishment. It happens when a creditor has the legal right to take money from your account. When you're subject to a bank account garnishment, your bank can freeze your account and turn over your money to your creditors. The bank may send you a letter notifying you about this, or you may just find out when you can't access your account.

Unpaid federal debts, such as back taxes or federal student loans, credit card balances, and unpaid child support or alimony are some of the types of debts that might result in a bank account garnishment.

Your bank has to follow rules before it can freeze your accounts for unpaid debt. Your creditor would first need to sue you for the debt and win, and then ask the court for permission to levy your account.

You can avoid this type of bank account freeze by staying up to date on your payments. If you're struggling with credit card or other high-interest debt, consider exploring credit card debt relief programs.

4. Illegal activity

Your bank may freeze your account if it suspects that you're using it for illegal activity. For example, lots of wire transfers going into and out of your account could trigger the bank’s warning systems for money laundering. The bank may freeze your account until you prove that no illegal activity is going on. 

The bank could also close your account entirely. This is different from a freeze because a freeze can be undone, allowing you to once again use the account. In an account closure,  the bank refuses to continue doing business with you.

Writing bad checks is another reason your bank could freeze your account. Check fraud is a crime. If the bank suspects you're writing bad checks on purpose, it may lock or close your account. 

5. Divorce

If you're involved in a contentious divorce with significant assets at stake, your spouse might request a court order to freeze accounts you share. A divorce court might grant this order if there’s a chance that one spouse could move money out of shared accounts without the other spouse's knowledge. 

That rule generally applies only to marital property. Any separate property you have, including bank accounts that are only in your name, may be exempt from a freeze order. It's a good idea to consult a divorce attorney to find out what laws apply for financial restraining orders in your state. 

If you and your soon-to-be ex are on friendly terms, you may be able to avoid this type of freeze by working together to decide what you'll do with the funds in your joint account until the divorce is finalized.

6. Inactivity 

Inactive accounts may be frozen if they sit dormant for long periods of time. Depending on how long the account goes without activity, the bank might close it altogether. In that case, the bank will mail the money in the account to your last known address on file. 

You may get a notice about your account being inactive before the bank freezes it. Avoiding this requires occasional account use. Talk to your bank if you're unsure how often you have to deposit or withdraw funds to avoid account freezes due to inactivity.

7. Unpaid overdraft fees

Your account could be frozen if you have a negative balance and you haven't made a deposit to bring your balance back to at least $0. In that case, the bank might freeze the account to prevent you from attempting to complete new transactions until a deposit is made. 

Your bank might send you a notice about this as well. Generally, you can resolve it by paying your overdraft fees. If you'd like to avoid this issue altogether, check your account balance before you make purchases to make sure you have enough money.

What Are Your Rights When Your Bank Account Is Frozen?

You have the right to know why your bank account was frozen and what options you have for unfreezing it. Your bank will likely reach out to tell you when the freeze takes effect. If it doesn't explain the reason for the freeze, you may have to ask for more information.

The notice you receive from your bank or creditor highlighting the reason for the freeze may also explain how you can dispute the freeze or garnishment if you feel something is incorrect. It should give you instructions for how to do this and list the deadline for how long you have to object to the freeze. Often, you'll need to file paperwork with a court, so you may need the help of a lawyer.

Your next steps depend on why the bank froze your account in the first place. For example, if the account was frozen because of suspicious activity, you could just ask the bank to unlock it. When suspected criminal activity on your part is involved, however, regaining access to the account may take more time. You may have to wait for law enforcement to finish its investigation. Also, you may need to provide other documents, like invoices, showing the validity of your transactions.

Types of income protected from freezes

Certain types of income in your bank accounts are protected. If you receive the money by direct deposit, your bank might protect it automatically. 

Protection isn’t always automatic, though. You may have to take steps to let the bank know that the money isn't subject to a levy or freeze. Examples of money that could be protected:

• Social Security, Social Security Disability Insurance, or Supplemental Security Income

• Public assistance benefits

• Veterans Administration benefits

• Pension payments

• Retirement account distributions

• Child support and alimony you receive

• Unemployment insurance benefits

• Workers compensation benefits 

Your state may have other sources of income it considers protected as well. 

If you have any of those types of income in your account, document it to the bank to get those funds released to you. For example, you may need paperwork showing that you receive Veterans Administration benefits and how much they are. Then, the bank will make this amount available to you.

Even for the protected income types above, there are limits. For instance, only two months of Social Security income is protected. If you're unsure how your state treats certain forms of protected income, contact your bank or a lawyer for more advice.

How to Unfreeze Your Account: Step-by-Step Guide

Here's a breakdown of how to unfreeze your bank account.

1. Contact your bank

The first thing you should do is contact your bank to learn why it froze your account if you don't already know. If the bank initiated the freeze, it should be able to tell you why that happened and what you need to do to fix it.

If the bank froze your account because they were legally required to do so by a court order, they should be able to provide you with details about which creditor instituted the freeze. Then, reach out to that institution to resolve the situation.

2. Resolve the issue with the appropriate party

If a bank simply believes your account may have been the target of fraud, you may just have to contact the bank and confirm your recent transactions. Once that's done, you could have your account unfrozen within the same day.

If the reason for the freeze is unpaid debts, resolving the issue could take anywhere from days to months. It depends on how long it takes for you to repay what you owe. If you’re struggling with debt, Freedom Debt Relief may be able to help.

If your bank suspects that you're using the account for illegal activity, you may have to provide documentation showing that your transactions were in fact legitimate. Contact your bank to learn what sort of paperwork you'll need.

3. Get legal help when necessary

If you owe the federal government or you're being accused of using your bank account to commit a crime, it might be wise to speak with a lawyer. They'll be able to advise you on the best way to navigate these tricky situations.

What Happens to Automatic Payments and Direct Deposits?

You can still put money into a frozen bank account, but that won't help you if you can't get the money once it's there. Contact your employer or any other organization, like the Social Security Administration, that directly deposits money into your bank account to update your payment information. 

You may need to open a new bank account and request that the organization send the money there instead. Once you have a place to put the money, you usually just have to fill out a form requesting the direct deposit change. It may take a few days after this for it to take effect.

Certain government benefits, including up to two months of Social Security payments, may remain accessible to you even when your account is frozen. You may still prefer to transfer these payments elsewhere so you don't have to worry about any issues.

You'll also need to make a list of all your automatic bill payments that were coming out of that account. You'll have to make those payments by check, cash, or credit card or use a different bank account until you've resolved the issue with your frozen account.

Dealing with Creditors Who Freeze Your Bank Account

If your bank account is frozen because of unpaid debts, unfreezing it is largely a matter of working with your creditors to come to a solution you both agree on. You might try any of the following to get your account unfrozen:

• Ask for a vacated judgment. In a vacated judgment, the court voids its earlier decision. This can end a bank account garnishment, but you'll need to go to court first. Before the judge voids the judgment that allowed a creditor to freeze your bank account, you’ll have to show why the decision was wrong. 

• Negotiate a settlement. Debt settlement allows you to pay off debts for less than you owe. You might propose a settlement to a creditor who's frozen your bank account. But if they already have access to your money, they might not agree. 

• File for bankruptcy. Filing bankruptcy can temporarily halt debt collection efforts and unfreeze your account. You’ll have to show a judge why you shouldn’t use the money in your account to satisfy your debt. Bankruptcy might be a good solution if other types of debt relief have failed.

If you think a creditor or debt collector might sue you over an unpaid debt, it's better to work out a payment agreement before it goes to court and results in a frozen bank account. You could offer to pay in installments or make a settlement to avoid the trouble and expense of a lawsuit.