There are few things more heart-stopping than logging into your bank account, only to realize it’s been frozen. Not only can you not access your money, but your bills also go unpaid due to insufficient funds in your account.
Unfortunately, credit card companies can freeze your bank account, but only after taking certain legal steps. If you’re behind on your credit card debt or your credit card company is suing you, it’s important to understand the risks you’re up against, including a frozen bank account, and what you can do about it.
How Credit Card Debt Leads to a Bank Account Freeze
If you’ve been sued by your creditor, or you worry you’re at risk of being sued, then it’s important to understand how you can go from unpaid debt to a frozen bank account.
The Legal Process from Debt to Judgment
Credit card debt is unsecured, which means that, unlike your mortgage or car loan lender, the creditor can’t foreclose on or repossess any of your assets if you don’t pay your debt.
When you default on your debt, your creditor will use several different strategies to get you to pay your bill, including imposing late fees, reporting your missed payments to the credit bureau, and sending collection letters or phone calls.
If the creditor still can’t collect payment, they may resort to a lawsuit, especially if you have a large debt balance. If the credit card company wins in court, the court will issue a judgment.
From Judgment to Bank Account Levy
When a court issues a judgment against a borrower, it may also order some sort of enforcement mechanism, which can include wage garnishment or a bank account levy. This ensures the creditor will actually get paid the money it’s owed.
When a bank account levy is ordered, your bank will receive the levy notice, and it’ll have to freeze your account. Unfortunately, you can’t access your money at this time. Once the court determines how much should be taken from the account to satisfy the debt, you’ll regain access to your account and funds.
In the meantime, the levy can create a ripple effect for the rest of your personal finances. For example, you may have automatic payments scheduled to come out during this time. When your other creditors aren’t able to withdraw their payments, they may impose late fees, report late payments to your credit report, and more.
Can a Creditor Freeze Your Account Without Warning?
A freeze on your bank account can seem quite sudden, but a creditor can’t freeze your account on their own. They first have to sue you and get a judgment and bank levy order from a judge.
Many borrowers either don’t attend their court dates or don’t even realize they’re being sued in the first place. So, when the default judgment is issued, along with the bank account levy, it comes as a shock.
Your Rights and Protections Against Bank Account Freezes
The financial system often feels like the deck is stacked against consumers, but you still have some rights when you’re dealing with creditors and bank account freezes.
Protected Funds and Exemptions
The money in your checking account may be vulnerable to creditors, but there are certain funds and account types that are protected. Even if you’re sued for your unpaid debt, federal and state laws prevent creditors from accessing these funds:
- Social Security retirement benefits
- Supplemental Security Income
- VA benefits
- Child support
- Some retirement accounts
While creditors can often garnish wages with a court order, there are also protections and exemptions. For example, some states protect a head of household from having their wages garnished.
Challenging or Reversing a Freeze
If your bank account was frozen, it’s possible to challenge or reverse the levy. First, if the account includes protected or exempt funds, you can challenge the levy and request that the court lift it.
You may also have the levy reversed if you weren’t properly notified of the lawsuit. However, there’s only a limited amount of time to do this, so it’s important to act quickly. As soon as you notice your bank account has been frozen, contact an attorney for help.
Your Right to Due Process
Even if you’ve been rightly sued for an unpaid debt, you still have the right to due process. Some of your rights include:
- The right to be properly served with notice of the lawsuit.
- The right to appear in court and defend yourself.
- The right to dispute incorrect debt amounts.
If a creditor violated any of these rights, consult an experienced debt help attorney to see if there’s a case to have your bank account levy thrown out.
How to Protect Yourself from Bank Account Freezes
If you’re struggling to pay your credit card debt, there are steps you can take to protect yourself from lawsuits and bank account freezes. The more proactive you are, the better your chances of avoiding problems.
Communicate with Creditors Early
If you’re having a hard time making your credit card payments, contact your creditors right away — ideally before you’ve even missed a payment. Your credit card company may be willing to restructure your debt, such as lowering your interest rate or setting up an installment payment plan. They likely want to avoid going to court, too, so they may be happy to work with you.
You can also try to settle your debt, which is when you negotiate with your creditor to pay less than the full balance. Debt settlement can benefit both parties, since the creditor gets at least some of the funds, while you avoid a lawsuit and get rid of your debt for less money. Don’t go in on it alone though, get professional help to ensure that the settlement process makes any legal matter go away.
Respond to Credit Card Lawsuits Immediately
If your credit card company sues you, don’t ignore it. If you don’t respond to the lawsuit, the court is likely to issue a default judgment in favor of the creditor, which could include a bank account levy or wage garnishment. Once that happens, it’s difficult to undo.
When to Seek Legal Help
If you’re facing legal troubles because of your debt, it’s best to speak to a debt relief attorney right away. An attorney who specializes in debt matters can help you if you’re being sued, if you’re facing legal judgments, or if your bank account has been frozen or your wages garnished.
The earlier you hire an attorney, the better the chances that they can help you avoid a judgment against you.
How Tayne Law Group Can Help
At Tayne Law Group, we’ve helped thousands of clients deal with their creditors when they’re behind on their debt. If you’re struggling with unpaid debt, our team has helped to negotiate a debt settlement or explore other debt relief options and alternatives to bankruptcy.
We have also defended many against a credit card lawsuits, stopped or reversed a bank account freeze, challenged improper levies, and helped to protect exempt funds.
Conclusion
A credit card company generally can’t freeze your bank account all on its own, but it can get a court judgment if it sues you for your unpaid credit card debt. Early action is critical when you’re facing a debt lawsuit. Don’t wait until your bank account is already frozen to act. Instead, reach out to a debt relief attorney as soon as you receive the lawsuit (or, ideally, even earlier).
If you’re struggling with your credit card debt or are being sued, we may be able to help. Contact Tayne Law group today by calling (866) 890-7337 for a no obligation phone consultation or filling out our short contact form to set up a consultation. We never share or sell your information, and all conversations are confidential.
