What Is an Account Freeze?
An account freeze prevents some bank or brokerage transactions from taking place. Typically, any open transactions are canceled, and checks presented on a frozen account aren't honored. The account holder can still deposit money into the account, but may not be able to withdraw it.
Key Takeaways
- Account freezes prevent transactions from going through in a bank or brokerage account.
- Essentially, money can be deposited into the account but no money can leave the account.
- Account freezes can be put in place by an account holder (in the event of a lost or stolen debit card), or the bank or regulatory authority.
- Freezes can occur for many reasons, including suspicious activity, suspected criminal activity, civil actions, or garnishments.
How an Account Freeze Works
Account freezes can be initiated by an account holder or a third party, such as a government, a regulatory authority, or a court order. When your account is frozen, the bank may send you a notice. However, you likely won't receive advance notice. Instead, you'll receive notice after the account is frozen. A joint bank account may be frozen, even if a debt or problem is only the issue of one account owner.
The account freeze will not allow you to withdraw money in any way, including through ATM machines or automatic payments, by writing a check, or through other transactions. You can still deposit funds but may also lose access to those funds.
Some funds in your bank account cannot be frozen if owed to a commercial entity, according to state and federal law. These funds include your Social Security payments and Veterans Administration benefits, as long as the amounts are added to your account by direct deposit.
A brokerage account may face a 90-day restriction if you engage in activities violating federal trading regulations, such as buying and selling a security before paying for it, also known as "freeriding."
A brokerage account restriction is not a true freeze—you can still purchase stocks and other securities, but you must pay for the purchase on the trade date.
Types of Bank Account Freezes
Account freezes can be initiated by different entities—and even by you. Many banks and credit card providers now allow consumers to freeze an account online. If you lose your card or it gets stolen, you can quickly freeze the account to prevent spending.
Court Order
One of the more common reasons for an account freeze is due to court-ordered garnishments, such as when a collector wins a lawsuit against you for an unpaid debt. Your bank or credit union may then be asked to provide money in your account. While the process is playing out, your account could be frozen.
Government Action
A government or regulatory authority may freeze an account due to suspicious activity or suspected criminal activity or to pay past-due child support. Some states can temporarily freeze a bank account to stop suspected financial abuse involving older adults.
Bank Failure
If a bank fails and is closed by the government, bank accounts may temporarily be frozen so that insured deposits can be provided to bank customers. While this allows you to access any insured deposits, it may also mean your transactions and automatic payments may not go through.
Accidental Deposit
If a deposit was credited to your account by mistake, the deposit amount could be frozen or put on hold until the issue is resolved.
Account Holder Death
Furthermore, a bank or brokerage account may be frozen when the account holder dies, depending on how the account is set up—even if it's a joint account.
A frozen account can result in missed payments, fees, and problems with your credit report. Act promptly to address a frozen account and ensure your monthly rent, mortgage, or other bills are paid on time, and get legal assistance if necessary.
How Do You Freeze a Bank Account?
You can freeze your bank account to prevent any debit transactions from clearing by logging into your online banking platform or mobile banking app (assuming your bank offers the option). Or you can contact customer service and request an account freeze.
Why Would a Bank Freeze an Account?
Banks can freeze an account for a variety of reasons, including suspicious or illegal activity, or unpaid debts due to creditors or governments. Banks may freeze accounts for using the account in a manner that goes against its policies.
How Long Can a Bank Freeze an Account for?
There is no set timeline that banks have before they have to unfreeze an account. For more complicated situations, the bank may request detailed information and take 30 days or more to review and decide whether to unfreeze or close the account entirely or release a portion of the funds to you—such as Social Security or other federal benefits.
The Bottom Line
Banks and brokerages have the ability to freeze a bank account for a variety of reasons. If you discover that your account has been frozen, you should contact your financial institution as soon as possible to learn the reasons for the freeze and what you need to do to have it lifted. Your next steps may require reaching out to creditors expecting payment, and getting legal help from an attorney.
FAQs
How Can You Unfreeze Your Bank Account? There is no specified period for which your bank has to keep your savings account frozen. Thus, banks may be ready to activate or unfreeze your account if you follow a prescribed process set by them and meet the conditions as mandated by the bank.
How long will my account be frozen for? ›
Frozen accounts do not permit any debit transactions. When an account is frozen, account holders cannot make any withdrawals, purchases, or transfers. However, they may be able to continue to make deposits and transfer money into it. There is no set amount of time that an account may be frozen.
How much time does it take to unfreeze an account? ›
For simpler situations or misunderstandings, usually, your account is frozen for seven to ten days. Complicated situations may require detailed information from you before the bank decides on the next course of action: to unfreeze or close the account entirely. This decision could take 30 days or more.
How long can a bank legally freeze your account for suspicious activity? ›
The duration of a bank account freeze depends on the circ*mstances. Simple misunderstandings may be resolved in 7-10 days, while more complex scenarios could take 30 days or longer. In cases where the freeze is due to tax obligations or legal disputes, there's no set time limit.
What are the rules for freezing accounts? ›
Freezing of the bank account must be 'forthwith' reported to the concerned Magistrate. The most often contravened condition under Section 102 of the CrPC is the requirement to apprise the Magistrate of the seizure of the property.
Can banks legally freeze your account? ›
Can the bank freeze the account? Yes. The bank may temporarily freeze your account to ensure that no funds are withdrawn before the error is corrected, as long as the amount of funds frozen does not exceed the amount of the deposit. Or the bank may simply place a hold on the deposit amount.
Can I unfreeze my account without going to the bank? ›
If your account is frozen due to suspicious activities, you can simply call up your bank and resolve it. If it is frozen due to any other reason that involves debts and bankruptcy, the best step to take is to go to the court and vacate the judgment at the earliest to unfreeze your account quickly.
Can I withdraw money from a frozen account? ›
Unfortunately, you can't withdraw cash or transfers from frozen bank accounts. However, you can try to unfreeze your frozen accounts.
How can I instantly unfreeze my bank account? ›
Alternatively, you can visit the nearest bank branch and discuss the issue with the Bank Manager. Once you are aware of the reason for your account being frozen, you can address the issue. For instance, if the KYC is incomplete, you can furnish details and unfreeze the account.
Can I open another bank account if one is frozen? ›
But in the meantime, if your account is frozen or might be, we recommend that you open a new bank account at a new bank where you don't owe any money. Notify your employer to deposit your paycheck into this new account. Move any money from your old account to your new account.
The account holder can visit the nearest bank branch and fill up a designated form for updation of customer details. Self attested copy of PAN or Form 60 shall be attached to the form and submitted. Original PAN should also be carried along at the time of submission.
Why do banks freeze accounts? ›
According to the Reserve Bank of India (RBI), banks have the authority to freeze accounts without prior permission from the account holder in cases of legal judgments, suspected illegal activity, or clerical errors. For instance, a bank might temporarily hold a deposit made in error.
How long can a bank account be under investigation? ›
Within 10 days after you notify the bank, the bank is required to investigate its records for an error; if the matter is still unresolved after 10 days, the bank must temporarily credit your account for at least a portion of the disputed amount and continue investigating for 45 days.
Can I sue my bank for freezing my account? ›
If you find that they did not have a valid legal reason to close/freeze your account, you can file a complaint or a lawsuit against the bank.
What happens to money in a frozen account? ›
Having your bank account frozen means that you can't withdraw or transfer money from your account or make scheduled payments. However, you can still receive deposits. Not to worry, the funds in your frozen bank account remain, unless further action is required.
What bank accounts cannot be frozen? ›
If a bank receives an order of attachment, it must review the account to determine if direct deposits into the accounts include certain government assistance income, such as Social Security and veterans' benefits. These benefits are generally exempt from the freeze.
How much does it cost to freeze an account? ›
A credit freeze, also known as a security freeze, is the best way to help prevent new accounts from being opened in your name. It's absolutely free to freeze and unfreeze your credit, and it won't affect your credit score.
What account Cannot be frozen? ›
There are laws in place which require banks to review anyone who is subject to a frozen account. If you have government benefits, such as social security, that are deposited directly into your account, that money cannot be frozen.
Can money still go into a frozen account? ›
Transferring money to the frozen account will be denied until the account is unlocked. In most cases, the customer must first resolve the issue that led to the freeze and then request the bank to unblock the account in order to be able to conduct financial transactions.
