Getting a notice that your bank account is frozen can be very embarrassing and alarming, especially if you’re trying to buy groceries or while out with friends.
What Is a Frozen Bank Account?
It can be distressing to know that your account is frozen, especially since it could be due to a debt or a potential issue with your account. Although it can be difficult to access your account, you can still make transactions.
How do you know if your bank account is frozen? According to the experts at SoFi Invest, “Bank accounts are frozen for several different reasons, and each one requires a specific set of steps to get the bank to unlock the account.”
Although it’s still possible to monitor your account, the freeze prevents any transactions from happening. This includes making purchases and withdrawing money from the account. It also prevents unauthorized transactions, such as those involving preauthorized payments.
Illegal or Suspicious Activity
Due to stricter regulations following the September 11 terrorist attacks, banks have the authority to freeze accounts if they suspect that the account holder is engaging in illegal activities.
Money laundering and terrorist financing are some of the reasons why banks often freeze accounts. These activities are carried out by criminals who use fake money to move large sums of funds across various accounts.
If the bank flags suspicious activity, it’s also possible that you were the victim of identity theft. Having a credit monitoring service can help keep you from getting victimized.
Unpaid Creditor Debts
If you have unpaid debts, your creditors can request that the bank freeze your account to collect the money. However, before they can do this, they must first get court approval. The same institution can access their accounts to collect people’s debts who have multiple loan accounts. Even after you default, the bank can still access your account.
Unpaid Government Debts
If you have student loans or taxes due to the government, your bank account may be frozen. The IRS can issue a tax levy if the debt is unpaid. The government can also seize your tax refund or a portion of your paycheck to collect the debts. If the loan is in default, the lender can garnish wages without going through the courts.
Although your bank account may have been frozen due to suspicious activity or debt collectors, it should not be wiped out of funds. However, some states have strict regulations for taking money from accounts.
A bank’s suspicion about a business account is based on the fact that it doesn’t show any activity or history of transactions. If the account’s owner is not a permanent resident of the account’s country, this could raise the bank’s suspicions.
It can be unsettling and frustrating to find out that your bank account has been frozen. Not knowing how to pay the bills can be a painful experience. Thankfully, there are ways to get your account unfrozen to use your funds again.