What Is an Account Freeze?
An account freeze prevents some bank or brokerage transactions from taking place. Typically, any open transactions are canceled, and checks presented on a frozen account aren't honored. The account holder can still deposit money into the account, but may not be able to withdraw it.
Key Takeaways
- Account freezes prevent transactions from going through in a bank or brokerage account.
- Essentially, money can be deposited into the account but no money can leave the account.
- Account freezes can be put in place by an account holder (in the event of a lost or stolen debit card), or the bank or regulatory authority.
- Freezes can occur for many reasons, including suspicious activity, suspected criminal activity, civil actions, or garnishments.
How an Account Freeze Works
Account freezes can be initiated by an account holder or a third party, such as a government, a regulatory authority, or a court order. When your account is frozen, the bank may send you a notice. However, you likely won't receive advance notice. Instead, you'll receive notice after the account is frozen. A joint bank account may be frozen, even if a debt or problem is only the issue of one account owner.
The account freeze will not allow you to withdraw money in any way, including through ATM machines or automatic payments, by writing a check, or through other transactions. You can still deposit funds but may also lose access to those funds.
Some funds in your bank account cannot be frozen if owed to a commercial entity, according to state and federal law. These funds include your Social Security payments and Veterans Administration benefits, as long as the amounts are added to your account by direct deposit.
A brokerage account may face a 90-day restriction if you engage in activities violating federal trading regulations, such as buying and selling a security before paying for it, also known as "freeriding."
A brokerage account restriction is not a true freeze—you can still purchase stocks and other securities, but you must pay for the purchase on the trade date.
Types of Bank Account Freezes
Account freezes can be initiated by different entities—and even by you. Many banks and credit card providers now allow consumers to freeze an account online. If you lose your card or it gets stolen, you can quickly freeze the account to prevent spending.
Court Order
One of the more common reasons for an account freeze is due to court-ordered garnishments, such as when a collector wins a lawsuit against you for an unpaid debt. Your bank or credit union may then be asked to provide money in your account. While the process is playing out, your account could be frozen.
Government Action
A government or regulatory authority may freeze an account due to suspicious activity or suspected criminal activity or to pay past-due child support. Some states can temporarily freeze a bank account to stop suspected financial abuse involving older adults.
Bank Failure
If a bank fails and is closed by the government, bank accounts may temporarily be frozen so that insured deposits can be provided to bank customers. While this allows you to access any insured deposits, it may also mean your transactions and automatic payments may not go through.
Accidental Deposit
If a deposit was credited to your account by mistake, the deposit amount could be frozen or put on hold until the issue is resolved.
Account Holder Death
Furthermore, a bank or brokerage account may be frozen when the account holder dies, depending on how the account is set up—even if it's a joint account.
A frozen account can result in missed payments, fees, and problems with your credit report. Act promptly to address a frozen account and ensure your monthly rent, mortgage, or other bills are paid on time, and get legal assistance if necessary.
How Do You Freeze a Bank Account?
You can freeze your bank account to prevent any debit transactions from clearing by logging into your online banking platform or mobile banking app (assuming your bank offers the option). Or you can contact customer service and request an account freeze.
Why Would a Bank Freeze an Account?
Banks can freeze an account for a variety of reasons, including suspicious or illegal activity, or unpaid debts due to creditors or governments. Banks may freeze accounts for using the account in a manner that goes against its policies.
How Long Can a Bank Freeze an Account for?
There is no set timeline that banks have before they have to unfreeze an account. For more complicated situations, the bank may request detailed information and take 30 days or more to review and decide whether to unfreeze or close the account entirely or release a portion of the funds to you—such as Social Security or other federal benefits.
The Bottom Line
Banks and brokerages have the ability to freeze a bank account for a variety of reasons. If you discover that your account has been frozen, you should contact your financial institution as soon as possible to learn the reasons for the freeze and what you need to do to have it lifted. Your next steps may require reaching out to creditors expecting payment, and getting legal help from an attorney.
FAQs
Account Freeze: Definition, Purposes, Time Length. An account freeze includes actions taken by a bank, brokerage or government to prevent transactions in an account. Sequestered Account: Meaning, Pros and Cons, Example. A sequestered account is a deposit account that is seized through legal action or court order.
What is the time limit for freezing accounts? ›
How Can You Unfreeze Your Bank Account? There is no specified period for which your bank has to keep your savings account frozen. Thus, banks may be ready to activate or unfreeze your account if you follow a prescribed process set by them and meet the conditions as mandated by the bank.
How long is an account frozen? ›
For simpler situations or misunderstandings, usually, your account is frozen for seven to ten days. Complicated situations may require detailed information from you before the bank decides on the next course of action: to unfreeze or close the account entirely. This decision could take 30 days or more.
How long can a creditor freeze your account? ›
In California, unpaid judgments are collectible for up to 10 years.
Why does my bank account freeze for 12 hours? ›
Reasons Why Banks Freeze Your Account. Banks routinely monitor accounts for suspicious activity to decrease fraud risks or to catch any illegal activity raising money for terrorist activities. If the bank suspects your accounts, they will be put under investigation, and your funds will be frozen.
How long can a bank legally freeze your account for suspicious activity? ›
The duration of a bank account freeze depends on the circ*mstances. Simple misunderstandings may be resolved in 7-10 days, while more complex scenarios could take 30 days or longer. In cases where the freeze is due to tax obligations or legal disputes, there's no set time limit.
Is it legal for a bank to freeze an account? ›
Can the bank freeze the account? Yes. The bank may temporarily freeze your account to ensure that no funds are withdrawn before the error is corrected, as long as the amount of funds frozen does not exceed the amount of the deposit. Or the bank may simply place a hold on the deposit amount.
What do banks do when they freeze your account? ›
Frozen accounts do not permit any debit transactions. When an account is frozen, account holders cannot make any withdrawals, purchases, or transfers. However, they may be able to continue to make deposits and transfer money into it. There is no set amount of time that an account may be frozen.
Can you open a new bank account if one is frozen? ›
But in the meantime, if your account is frozen or might be, we recommend that you open a new bank account at a new bank where you don't owe any money. Notify your employer to deposit your paycheck into this new account. Move any money from your old account to your new account.
What does it mean if my account is frozen? ›
When a bank freezes your account, it means there may be something wrong with your account or that someone has a judgment against you to collect on an unpaid debt. An account freeze essentially means the bank suspends you from conducting certain transactions.
Freeze account meaning
When your Savings Account is frozen, it means that you are unable to withdraw funds from your account via the ATM or chequebook. You will be unable to transfer funds from or into your account. You will also be unable to leverage your Debit Card to make purchases from your account.
Is there a time limit for creditors? ›
If you've already been given a court order for a debt
There's no time limit for the creditor to enforce the order. If the court order was made more than 6 years ago, the creditor has to get court permission before they can use bailiffs.
What type of bank account cannot be garnished? ›
Some sources of income are considered protected in account garnishment, including: Social Security, and other government benefits or payments. Funds received for child support or alimony (spousal support) Workers' compensation payments.
How long does it take for a bank to unlock your account? ›
Why Was My Banking Account Frozen?
| Scenario | Action Required | Estimated Time to Unfreeze |
|---|
| Legal or Compliance Review | Completion of legal processes or compliance reviews. | Varies (could be weeks or months). |
| Security Concerns | Resolution of security issues such as suspected identity theft. | 5 to 30 days. |
6 more rowsJul 13, 2022
Can a blocked account receive money? That depends on the type of account and the reason why it was blocked. Usually, withdrawals are an issue rather than deposits. However, there may be occasions, such as when a bank account is blocked by a government, when any transaction whatsoever becomes prohibited.
How to withdraw money from a blocked account? ›
Gather Required Information
- The name and title in which the account is held.
- The name of the bank or other institution holding the account.
- The name and address of the bank branch holding the account.
- The account number.
- The current balance of the account;
A credit freeze, also known as a security freeze, is the best way to help prevent new accounts from being opened in your name. It's absolutely free to freeze, unfreeze and temporarily lift a freeze on your credit, and it won't affect your credit score.
What account Cannot be frozen? ›
There are laws in place which require banks to review anyone who is subject to a frozen account. If you have government benefits, such as social security, that are deposited directly into your account, that money cannot be frozen.
Can a bank account be frozen without notice? ›
Before the account is frozen to protect the funds, the account holders do not need to be notified by the bank. An unauthorised chance to withdraw money would exist if the account holder had been informed beforehand.
How long should I keep my credit frozen? ›
A credit freeze lasts as long as you want it to. You could remove the freeze temporarily ahead of a big purchase, like a home or car. A freeze does not affect your credit score.
