When a person owes a significant amount of money to a creditor, the creditor may attempt a variety of methods to obtain the money owed. Until the creditor sues the debtor in court, his actions are relatively limited: He can contact the debtor to remind him of his debt or invoke any punitive clauses in the contract. However, if the creditor wins a lawsuit against the debtor, he may be able to freeze the debtor's bank account.
Lawsuit
A creditor is not allowed to attempt to freeze a bank account extrajudicially. A freeze must be ordered by a court judge, and a judge will allow a bank account to be frozen only if a creditor has won a civil judgment against the account holder. This can only be accomplished by suing the debtor in civil court, usually for breach of contract. If the creditor wins the case, he can file a motion to freeze the account.
Bank Freezing
If a debtor refuses to pay the money as ordered by a judge, creditors can step up their efforts for repayment. Creditors are allowed to file a motion to put a freeze on one or more of the debtor's bank accounts, which prevents him from withdrawing money from those accounts. Before the judge grants the motion, the debtor usually is given an opportunity to explain why his account should not be frozen.
State Laws
Each state has its own laws regarding the circumstances under which accounts can be frozen. In many cases, a debtor is required to pass a means test, to determine his disposable income, before the motion can be granted. If the person does not have sufficient income, the freeze cannot be put into effect. In addition, some states do not allow bank account freezes for the collection of certain kinds of debts.
Exempt Assets
Some assets cannot legally be frozen. If a creditor attempts to freeze exempted assets, a judge is required to lift the freeze. Accounts containing benefits provided by the federal government typically cannot be frozen by private creditors. However, many government agencies, such as those responsible for collecting child support payments and taxes, can freeze accounts that contain these benefits.
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