How to Unfreeze a Frozen Bank Account In NY
Sometimes we hear from prospective clients who are surprised to find that a creditor has had their bank account frozen and cannot withdraw money from the account. They are afraid that their creditors will be allowed to take their money in addition to not being able to access their bank accounts. They have questions about unfreezing a frozen bank account in New York.
Attorney Michael H. Schwartz can help clients unfreeze bank accounts frozen by creditors in New York. We advise clients that even with a frozen bank account, some of their holdings are protected and can never be taken by creditors to satisfy money judgments.
The law office of Michael H. Schwartz, P.C., a New York debt relief firm, is dedicated to helping clients protect their assets and providing real solutions to money problems. Our law firm has been offering quality legal representation to consumers and businesses in Westchester, Rockland, Putnam County, the Hudson Valley, and New York City areas for almost 40 years. Contact us for a consultation about frozen bank accounts, bankruptcy, foreclosure, or mortgage default issues.
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How Does a Bank Legally Freeze Your Account?
First, it was probably not your bank’s idea to freeze your account. Creditors who hold private debt, such as credit card debt and medical bills, may file lawsuits against delinquent credit holders to obtain a money judgment. A money judgment is a court order that allows the creditor to use methods to collect debts that are unavailable without a judgment.
A money judgment allows a creditor to present legal papers to the bank or credit union requiring it to freeze the indebted consumer’s bank account. This allows a creditor to take money directly from the account.
Does My Bank Have To Give Me Notice Before Freezing My Account?
A creditor or debt collector is required to notify you that it has filed a lawsuit against you and then notify you again that it has obtained a judgment. A bank must freeze the account immediately upon receipt of papers from the creditor who has won the money judgment.
When your bank account is frozen, you can put money into it, but you can’t take money out. Unfortunately, it is not uncommon for people to discover their bank account is frozen when their ATM withdrawals are denied.
Protection from Creditors When You Have a Frozen Bank Account
Under the Exempt Income Protection Act in New York State, even with a judgment against you, most creditors cannot take or freeze all of the money in your account — no matter how much you owe. This applies to consumer debt. Some creditors, such as those collecting on student loans or child support, may be able to freeze your bank account even if the account contains exempt funds.
Funds exempt from creditors include:
- The first $1,740 in your account
- Ninety percent (90%) of your wages earned during the previous 60 days if you need them for basic needs, such as rent or mortgage payments, food, and medicine
- Money received via Social Security, disability benefits, workers’ compensation, or veteran’s benefits
- Alimony or child support
- Public or private pensions
If you have exempt funds such as your Social Security check directly deposited each month into your account, your bank must leave at least $2,500 in the account. If your exempt funds are not directly deposited into your account, your bank may not know that you have exempt funds in the account and might freeze your funds over $1,740.
You may have to file an Exemption Claim to keep a creditor from taking the exempt funds if your money is not directly deposited into your account or you have more than $2,500 of exempt funds. You should do so within ten days of notice of the freeze.
How Long Can a Bank Legally Freeze Your Account?
A bank account may remain frozen until you have satisfied the condition that has been set to lift the freeze, such as payment of your debt or 12 months. In place of paying your entire debt, you may be able to negotiate a plan for payment with your creditor.
In most cases, if you cannot pay your debt, you will need to go to court to have the judgment vacated. Having the judgment vacated is usually required to have it removed from your credit report.
Contact a Debt Relief Lawyer in NY Today
It’s possible to have a judgment vacated on your own, and for most people, it is better to proceed with the assistance of a knowledgeable attorney who understands the process and your rights. To arrange for a initial consultation about your financial issues with a lawyer at Michael H. Schwartz, P.C., call us toll-free at (855) 637-1359 or contact us online. We are committed to providing you with the information and services you need to secure a better financial future.
Michael H. Schwartz is the largest filer of bankruptcy cases for people living in Westchester and Rockland counties in New York. A graduate of New York Law School, Michael has been licensed to practice in New York State courts since 1983. He is also licensed to practice in the U.S. Bankruptcy and District Courts for the Southern, Eastern and Northern Districts of New York and the District of New Jersey as well as the Second Circuit U.S. Court of Appeals. He is a graduate of Max Gardner’s Bankruptcy and Veterans’ Boot Camps. Several media outlets have reported on his cases or sought his insights, including The New York Times.
