If you default on your debt, your creditors may sue you. If you don't show up in court, your creditor wins a default judgment and may take legal action against you such as garnishing your wages or freezing your bank account. If your bank account is frozen, you won't be able to access your funds. Your creditor can freeze your account for up to the amount of the judgment. If you have enough funds in the account to cover the judgment, the freeze lasts 21 days after the court orders it.
Repayment of Debt
If a creditor freezes your bank account, the account remains frozen until you repay the debt is completely. Usually, the bank must freeze an account for 21 days and then release the funds to your creditor. If this settles your debt, your bank account will be unfrozen after this point. If you don't settle, then the amount that is left remains frozen -- if you put funds into the bank account, the creditor can seize those funds as well.
Prohibition of Freezing
Creditors cannot freeze your bank account at all if you use it only to hold certain funds that are exempt from freezing. Social Security benefits, veteran benefits, disability benefits, child support and alimony, workers' compensation funds and public assistance funds are completely exempt from freezing. If you have other funds in the account, however, your creditor may still freeze your account in accordance with the 21-day rule.
Required Notices
Your creditor does not need to inform you before freezing your bank account. However, you must first receive a notice that your creditor has filed a lawsuit against you and that your creditor has won a judgment against you. If you do not receive any such notices and a creditor freezes your account, contact your attorney. A creditor cannot legally freeze an account without providing these notices.
What to Do
If your bank account has been frozen, you can go to court to ask a judge to vacate the judgment. You do not need an attorney to vacate a judgment; however, you may wish to consult one about your options or retain one to help you negotiate with your creditors. In many cases, you can settle out of court and the creditor will drop the freeze on your bank account. You can get a judgment vacated if you can provide a reasonable excuse for not going to court the first time and proof that the debt is not yours. You can also get it vacated if you were not given proper notices regarding the lawsuit.
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