What happens if your bank account freezes
It can be embarrassing and frustrating to realize that your bank account is frozen. Even wo
It can be embarrassing and frustrating to realize that your bank account is frozen. Even worse when trying to withdraw money for a friend’s hangout or trying to use your debit card at the supermarket. Why would a bank freeze your accounts? Why would they freeze my bank account? Who has the right to freeze your bank account? There are several reasons for these acts and each reason requires a unique step to unfreeze it. Here are top-notch reasons why a bank account can be frozen.
What is a frozen account?
It's quite disappointing to find out that your saving account is frozen. Often, when a bank freezes an account, there’s something wrong with that account or a person has failed to settle a debt. In other terms, a frozen account is a specific bank account suspended from conducting various transactions. Still, you access your account but there’re restrictions to what you can do.
What happens if your bank account freezes? You can only receive deposits and monitor your account. However, you can’t make any withdrawals or transfers. That means the amount deposited into the account during that period stays on hold. Such include preauthorized payments you may decide to go via a saving account or checking account. Therefore, if you’ve a monthly gym fee, mortgage payment, or car loan payment, the likelihood they won't go through.
Most banks have the discretion and authority to freeze accounts, especially if they suspect the person is doing malicious activities. Reports indicate that banking statutes become strict after a group of terrorists ordered a crackdown on criminal business preferably using financial institutions to do their business.
Why do banks freeze accounts? Banks monitor accounts to avoid practice like money laundering, where money produced from criminal practice is deposited into the bank accounts and then circulated to make it looks like originated from a legitimate source.
Another reason why banks freeze accounts are suspected terrorist financial. In addition, you can freeze your bank account if write bad checks. It’s easy to cash a check you’ve written even if you don't have enough funds in your bank account. But it's a more dangerous action because banks will consider it fraud. Also, unusual and large deposits can freeze your account even if they’re legit. Therefore, if you happen to win a lot of money at the casino, it's essential to alert your bank.
Further, if a bank suspects illegal activity you weren’t sure off, you may have been a victim of identity theft. So, the best way is to seek for best banks that offer vital tools and identity theft insurance to protect your data.
Unpaid debts through creditors
Who can freeze your bank account? Creditors can make a bank freeze your account, especially if you’ve unpaid debts. However, they must seek approval from the court before taking the measure. But you can access your account to pay the defaulted loans without filing the lawsuit, specifically if you've a loan from the same institution as their bank account. Remember, when signing any loan, you automatically authorized the bank full access to your account even during the default period.
Unpaid debts to the government
People owing students taxes or loans to the government may find their accounts frozen. The Internal Revenue Service can also issue a tax levy, particularly for unpaid taxes. And they won't lift till the debt is settled fully.
Today, the government does things for unpaid student loans like garnishing or seizing the tax refund of your paycheck monthly. So, if your loan is in default status, likely the loan lender may garnish taxes and wages without pursuing a judgment from the court.
Whether your account is frozen due to suspicious activity or debt collectors, it should remain with a certain amount. Based on the kind of country you reside in, there're limits on the amount can take from your bank account. For instance, it's illegal for creditors to cash out workers' compensation, Social Security Benefits, and child support in some countries. But ensure you file a claim of exemption within 10 days after your bank account is frozen.
What you should do after your account is frozen
Banks always alert their clients before freezing their accounts. Once you receive notice, contact your bank immediately to see what actions needed to be taken and ensure there’s no issue again. Know that if you ignore a frozen bank account, you may worsen the issue, resulting in a reduction in your credit score and even a buildup of bank fees. So, if your bank account is frozen due to practice you know is legit, visit your bank branch with proof. If you can prove there's no issue, the bank will permit you again to the account and revoke the suspension.
If your account is frozen because of unpaid debts, it's essential to find the creditor's attorney’s data from your bank. You must know what’s going on with your account and strike a payment agreement.
Always seek legal help. Consumer bankruptcy attorneys won’t force you to pursue bankruptcy. Instead, they’ll help understand the legal steps that creditors can take and what’re your rights on whole situations. However, if the debt is owed by the government whether little, you won’t access your account. And remember, these debts don’t just disappear even if you go bankrupt.