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Can a Debt Collector Freeze Your Bank Account?

Chloe Meltzer | December 12, 2023

Chloe-Meltzer
Legal Expert
Chloe Meltzer, MA

Chloe Meltzer is an experienced content writer specializing in legal content creation. She holds a degree in English Literature from Arizona State University, complemented by a Master’s in Marketing from California Polytechnic State University-San Luis Obispo.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Were you sued for an old debt and had a judgment placed against you? If you're worried about having a debt collector freeze your bank account, find out what you can do about it.

Having your bank account frozen means that although your funds exist, you cannot access them. If you owe a credit card debt or loan, a debt collector has no right to freeze your bank account until they obtain a court judgment against you. Debt collectors see freezing your bank account as a way of pressuring you into paying off your debt, and sometimes it works.

Your Bank Account Might Have a Large Negative Balance

After a judgment creditor puts a hold on your bank account, you may notice that you have a hugely negative balance. This is because the debt collector can legally charge you for twice the amount of the judgment against you. Although you do not owe this all, it will show up as a negative balance.

Avoid frozen bank accounts by filing a response with SoloSuit.

Your Bank is Not Required to Notify You Beforehand

Unfortunately, you may receive no notice before your account is frozen. This is because the judgment acts as a notice to freeze your account immediately. You may even find out that your bank account is frozen while trying to pull money from an ATM or use a debit card.

Avoid Having Your Bank Account Frozen by a Debt Collector

Both your bank and the judgment creditor do not need to give you specific notice when freezing your bank account, but there are ways to avoid having your account frozen.

  1. The debt collector will notify you when the first lawsuit is placed against you. This means that you will have time to respond to avoid the judgment.
    1. You will again be noticed when they have obtained a judgment against you. Your first notice of the court case should not be a frozen bank account. In this case, something went wrong, or you have not received proper notice. You may be able to fight this.

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Unfreeze Your Bank Account After a Judgment

The best way to unfreeze your bank account is to remove the judgment against you. There are only three ways to remove a judgment against you, either by vacating it, satisfying it, or discharging it. Vacating the judgment is your best option as this will immediately release the freeze.

Vacate the Judgment to Unfreeze Your Bank Account

Some cases do not allow you to vacate a judgment against you. If you answered a lawsuit and the court entered the judgment against you, there is a rare chance it will happen. Despite this, if you were given a default judgment (meaning you did not answer the summons), then you may have the option to vacate. Different states have different laws, but most often you must file a motion with the court asking the judge to vacate the judgment.

Satisfy the Judgment to Free Up Your Funds

By satisfying a judgment you are essentially paying it off. Oftentimes you can end up settling the judgment for less than the full balance that you owe. If you do seek to settle a judgment, ensure that the entire judgment is considered settled, and ask for written proof.

Discharge the Judgment Through Bankruptcy

Essentially the only way that a judgment can be discharged is through bankruptcy. This should never be your first choice, but if you are suffering from other forms of financial hardship and you have explored all other avenues then it can be an option.

Negotiate a Settlement Without Going to Court

There are a few cases where you may not need to negotiate a settlement to unfreeze your account. If your account contains any form of exempt benefits or retirement benefits, then you will not need to go to court. Exempt benefits include:

  • Public Assistance (PA)
  • Supplemental Security Income (SSI)
  • Social Security
  • Social Security Disability (SSD)
  • Veterans benefits (VA)
  • Child Support
  • Spousal Maintenance
  • Workers Compensation
  • Unemployment Insurance
  • Railroad Retirement benefits
  • Black Lung benefits

If your bank account contains recent wages or nonexempt funds, then you most likely will need to go to court. You most likely will be able to negotiate much better in court versus out of court. This will allow you to vacate the judgment if possible.

Use SoloSuit to respond to creditors and debt collection agencies fast.

Reasons to Petition a Vacate of Judgment

Unpaid judgments can be collected within the statute of limitations which is typically up to 20 years. Not only do unpaid judgments allow your bank account to be frozen, but they can also allow debt collectors to garnish your wages.

On top of that, judgments also appear on your credit report. This may affect your ability to obtain loans, housing, and even employment. Typically it is always best to vacate the judgment if possible.

What is SoloSuit?

SoloSuit makes it easy to respond to a debt collection lawsuit.

How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

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