Frozen Bank Accounts

It’s everyone’s worst nightmare: heading to the ATM one day, only to find that all assets have been suddenly liquidated! Was it an identity thief? Did the bank make a terrible mistake? More often than not, there has been some wrongdoing on the account holder’s part and a creditor has resurfaced to collect a debt. There are many reasons an account may be legally seized; but this event, while terrible, should never come as a shock.

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Who can freeze bank accounts?

Bank accounts are frozen when an unpaid debt exists. The Government’s Internal Revenue Service is the #1 seizer of bank accounts due to unpaid debts. The Department of Child Support Enforcement has also been known to garnish wages or place a bank levy on those who refuse to pay child support. In divorce cases, it is not uncommon for one spouse to freeze a joint account until the estate is settled. Technically, any creditor can go through the process of obtaining a bank levy, no matter how big or small the debt is.

Can a spouse freeze an account?

A spouse can freeze a joint-controlled bank account that will not allow any money in or out without mutual written consent. Often this happens prior to a separation so that all assets are divided equally. Many times a greedy spouse will try to liquidate the account and hide money all over the country. Other times, more money is pumped into the account to frame the other person for “withholding large, undocumented sums of money.” Divorce can get pretty ugly, so lawyers usually recommend freezing the account, while opening a separate account to deal with incoming funds, until the divorce settles.

In rare instances, a possessive spouse may put an “emergency fraud” freeze on a bank account to stop his or her partner from withdrawing money. Unfortunately, if both names are on the account, this may need to be resolved through court.

Other times, once a divorce is underway, an ex-spouse may freeze an account. First a lawsuit must be filed in court, however. Then the judge must award a writ of judgment, entitling the plaintiff to a set amount of money in the bank account. The loser in this court battle will receive a written notice before the funds are transferred and may seek out legal counsel to prevent this action from being taken.

Can the government freeze bank accounts?

People who have not paid their taxes are subject to having their bank account seized without the standard court order. The Internal Revenue Service can put what’s called a “tax levy” on rogues who try to shirk their social responsibility to pay into the system. Once the account is levied, there is a freezing period of 21 days while account ownership is verified.

After the holding period, the amount owed (plus interest) will be handed over to the IRS unless the tax debt is otherwise satisfied. If there is not enough money in the account, all assets are seized and the bank account remains frozen until the debt is paid.

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While it may sound heavy-handed and invasive, this sort of seizure doesn’t happen by surprise. The IRS will typically send out a “Notice and Demand for Payment,” a “Final Notice of Intent,” a “Notice of Your Right to a Hearing” and the actual levy notice itself. Sometimes a good attorney can reverse, stop or renegotiate a tax lien or levy, although their fees may be high considering it can take up to fourteen hours of work to settle these serious penalties.

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