Can a Creditor Freeze a Joint Bank Account?

When a person owes another party a substantial amount of money, the creditor can take a number of actions to receive compensation. With the permission of a judge, the creditor can often seize assets from the debtor, including garnishing wages and freezing bank accounts.

Features

According to bankruptcy attorney Ronald S. Cook, a creditor seeking to freeze assets will generally notify the bank of its request. If the bank complies, the account in the debtor's name will be rendered unavailable to him. A creditor is allowed to freeze up to twice the amount of money owed, and the freeze will generally apply to deposits made to the account after the freeze has been instituted. Joint bank accounts, in which one party is the debtor, aren't indemnified against freezing.

Function

Freezes are placed by creditors as a means of compelling the person to pay. Although the creditor cannot directly withdraw the money from the frozen bank account, the debtor's inability to access her money may provide her with an incentive to make payment to the creditor. Before the account can be unfrozen, the debtor will generally be required to appear in court and petition the judge to unfreeze the account. This will usually require the debtor to offer some payment on the amount owed.

Exemptions

According to Illinois Legal Aid, a number of funds are exempt from seizure and freezing. These include Social Security benefits, public assistance benefits, unemployment insurance, awards made under a law for crime victims' compensation, and many forms of income needed to support a debtor and his family. In addition, depending on the laws of the state in which the account is held, many pensions and retirement funds are protected from seizure as well.

Joint Depositors

According to Indiana Legal Services, if only one depositor who holds the account is being sought by creditors, then the other depositor's funds are exempt from seizure. However, the other depositor must be able to clearly demonstrate which funds she deposited into the account so that they can be removed from the freeze. However, if the other depositor was named in the judgment in the creditor's case, her funds can be frozen, too.

Considerations

State laws differ on the rights of a joint depositor not named in a judgment. For example, according to the Neighborhood Economic Development Advocacy Project, a New York resident may be able to have his account unfrozen if he can show that the party named in the legal judgment had her name on his account for convenience only. If he cannot show this, he can still have half the money in the account unfrozen, unless the creditor can show more than half of the money belongs to the debtor.