If a creditor freezes your bank account, you may have the funds in the account released under certain conditions. For instance, federal laws prevent a creditor from freezing your bank account if the amount in the account is below an established threshold. In addition, the law protects bank accounts that contain funds from Social Security and other types of exempt income. In such cases, getting your account released is a matter of providing proof.
Exempt Income Protection Act
The Exempt Income Protection Act (EIPA), a federal law, protects bank accounts that contain subsistence funds such as government benefits, pensions and other types of unearned income such as a worker's compensation. The law prevents creditors from freezing your bank account to pay off private debts such as credit cards. Under EIPA, if your bank account contains less than $2,500 from sources such as Social Security, unemployment benefits or public assistance, a creditor cannot freeze your bank account. For all other source of funds, the threshold is $1,740.
Unfreezing your Bank Account
The quickest way to unfreeze your bank account is to vacate the judgment against. To freeze your account in the first place, the creditor must obtain a default judgment in court giving it permission. According to New York-based Neighborhood Economic Development Advocacy Project (NEDAP), a client has a better chance of vacating the judgment, which automatically releases the lien on your account, by going to court to negotiate a settlement. If you can prove you have exempt funds in your account, the court will vacate the judgment. You may want to consider hiring an attorney to represent you in court.
Joint Bank Accounts
If you share a joint bank account, the other party may have the account released under Banking Law 678. She must prove she added you to the account for convenience, you do not have an ATM card or withdrawal privileges and the money in the account belongs to her. If she cannot prove the account is for convenience only, she can recover half the funds in the account. The law presumes half the funds belong to her. Therefore, a creditor cannot take more than half the funds in the account.
Negotiation
If you are in default, do not wait until the creditor takes the matter to court. This makes it more expensive for you, as the creditor adds its legal expenses to the amount of money you owe. By law, the creditor must properly notify you of a court summons to appear in court to address the debt. Even then, you have an opportunity to negotiate with the creditor and, in some cases, for a reduced amount. Creditors often prefer to settle out-of-court.
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