Help! My Bank Account Is Frozen!
Fewer things can throw your world
upside down like having your bank account frozen. A bank garnishment or seizure
is usually the result of a creditor attempting to collect after a court has
issued a judgment against you. The court orders the bank to freeze your account
and turn over its proceeds to the judgment creditor. The order is usually timed
by the creditor's attorney to take effect just before your paycheck is
deposited. Seizing a bank account is generally a creditor's first action
because federal and state laws limit the amount that can be garnished directly from
an employee’s paycheck. These limitations do not apply to cash money in a bank
account.
Once your bank account is frozen,
it is important to act quickly. You are entitled to protect some money from
garnishment, but you must notify the court, the creditor, and the bank that you
are asserting your legal exemption rights. Additionally, if you receive Federal
benefits that are directly deposited into your bank account, the federal law
will protect an amount equal to two months of these benefits. These benefits
include Social Security benefits, Supplemental Security Income benefits,
Veteran’s benefits, Railroad Retirement benefits, and benefits from the Office
of Personnel Management. Federal benefits are exempt from garnishment, and the
law places the burden on the bank to determine if the funds are protected.
Finally, a bankruptcy filing will
immediately stop a garnishment and unfreeze your bank account. A debtor can
often force the garnishing creditor to return money seized just prior to a
bankruptcy filing. The general rule is that involuntary payments that amount to
over $600 seized by a creditor in the 90 days before filing can be recovered.
If you have had your bank account
seized, it is important to speak with an experienced bankruptcy attorney
immediately and discuss your short term and long term options. Quick action is
necessary to unfreeze your account, but it is also important to discuss your
long term plan to avoid garnishments in the future. Your attorney can help you
decide on a sensible plan to eliminate your debt and progress to a better
financial future.
