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

The first step to unfreezing a bank account is understanding why the bank froze your account so you can take action to correct it. Sometimes, it's as simple as contacting the bank to request that it unfreeze your account. Other times, the fix is a bit more involved. Let’s explore what you can do about it 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 in to online or mobile banking and view your account balances. You may still be able to make deposits as well. 

However, you might not be able to do any of the following:

• 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 either. 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 sees 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.

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.  

That's actually a good thing, because a frozen bank account can 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 can help you protect your money and unlock your account faster.

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 assets to your creditors. 

The kinds of debts that might result in a bank account garnishment include unpaid federal debts, such as back taxes or student loans, credit card balances, and unpaid child support or alimony. 

Rules apply before your bank 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.

Certain types of income in your bank accounts are protected. 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 

If you have any of those types of income in your account, document it to the bank to get those funds released to you. Also, there are limits. For instance, only two months of Social Security income is exempt from a levy.

4. Illegal activity

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

Writing bad checks is another reason your bank could freeze your account. Check fraud is a crime. If the bank suspects that you're writing bad checks on purpose, it may lock 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 such an 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 to marital property only. Any separate property you have, including bank accounts in your name only, 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. 

6. Inactivity 

Inactive accounts may be frozen if they sit dormant for long periods of time. Depending on how long the account goes with no activity, the bank might close it altogether. In that case, the bank will mail you the money that was left in the account, to your last known address on file. 

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. 

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 upfront, you may have to ask for more information.

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, unfreezing it may be as simple as asking 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.

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. Depending on the situation, you might try any of the following to get your account unfrozen:

• Ask for a vacated judgment: A vacated judgment is when 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 what's owed. 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. However, you’ll ultimately have to show a judge why you shouldn’t use the money in your account to satisfy your debt.

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. 

How to unfreeze a bank account

To unfreeze a bank account, you'll first want to contact the bank. It should be able to tell you why the account was frozen. 

What you do next will depend on the reason for the freeze. If it's an issue with the bank itself, then you'll need to work it out with the bank. For example, if your account is frozen because of overdrafts, you'll need to make a deposit to get it unstuck. This sort of freeze can be undone relatively quickly once you've paid the fees due.

If it's an issue with a creditor, you'll need to get in touch with the creditor. The bank should have the creditor's information on hand if a bank account garnishment is the result of a court order. From there, you can reach out to the creditor to discuss possible options for unfreezing your account and managing your debt obligations. If you’re struggling with debt, a debt relief program may be able to help.

In the meantime, you might want to look into opening a new bank account while you work out the issues with your old one. If you had your paychecks directly deposited in the frozen bank account, work with your employer to switch these deposits to your new account so you don't lose access to your earnings.