What to do when your bank account is frozen

Discovering that your bank account has been frozen can often times be one of the most shocking and unsettling experiences of your life. Usually, this discovery is made while attempting to use your check card on-line, at an ATM, or even worse – at a store (in front of a long line of other people waiting to cash out their items). It can be an embarrassing experience that is further worsened by the fact that you may have an urgent need to spend your money but can’t. You can’t pay your rent, buy groceries, put gasoline in your car – the list goes on and on. Most people call their bank right away only to learn that a judgment they knew nothing about has now led to a restraint on the funds in your account(s).

So, what happens now? What steps can you take to try and fix this big problem? What rights and protections do you have in New York State?

The first thing to realize is that your bank account has been frozen as a result of someone (likely a credit card or loan company) obtaining a judgment against you. If you didn’t know about the lawsuit, then you couldn’t have fought it and therefore the creditor/plaintiff was probably awarded a default judgment for the amount they requested. To learn more about the underlying lawsuit, you can ask your bank to provide you with the name of the “judgment-creditor,” their law firm, and the case’s “index number.” Armed with that information, you can contact the corresponding court and ask for copies of the Summons, Complaint, Affidavit of Service, Affidavit of Merit and a Judgment. This documentation will provide you with information that may support the filing of a Motion to Vacate (a.k.a. an Order to Show Cause).

This would be the best time to speak with an attorney at our law firm, as we can explain what the process entails and ensure that you put your best foot forward. Please Note: Filing an Order to Show Cause doesn’t mean that the account will be released right away – or even at all. However, if the Order is signed by a Judge and has been prepared properly, you can at least temporarily prevent the creditor and their lawyers from taking the money out of your account. If and when an Order to Show Cause has been filed, the Court may schedule a “Traverse” hearing wherein the parties involved appear and debate whether service, as it is defined by NY law, actually occurred. If the Judge decides in your favor, then the judgment is vacated, the case should be dismissed, and your bank account should be released. This process can be time-consuming and often-times factors into the decision-making process for many people.

So what else can you do if you don’t necessarily want to file an Order to Show Cause?

Upon restraining your bank account, a written notice will be sent to your attention advising you that if you have certain types of money in your account, they may be “exempt” from restraint. If you believe that your money falls into those categories (which include things like Social Security, Worker’s Compensation, Disability Benefits, etc.), then the notice outlines the process for getting your account released. Follow this notice closely and be sure to take action right away to avoid any complications from arising. This process is usually quicker than filing an Order to Show Cause, but can still possibly take several weeks to resolve. Don’t skip this procedure and expect that communicating with the creditor’s attorneys directly will suffice. They do not have your best interests at heart and your reliance on them may be to your own detriment.

What else should you know?

There is a law in New York known as the “Exempt Income Protection Act” (EIPA) that recognizes the need people have to access money in their accounts for necessities of life and thus establishes totals that should remain available to you even once your account has been frozen. For example: under the EIPA, if your bank determines that you possess $1,950 or less of non-exempt income in any account, that account cannot be frozen. This also means that anything above the $1,950 can be taken (if no non-exempt funds are identified).

On the contrary, if your bank determines that some of the money in your account contains exempt funds, then the cut-off is raised to $2,660. That means that if you have less than $2,660 of exempt and non-exempt income in your account, there should be no freeze whatsoever – but anything above that amount can be frozen (unless and until that amount is shown to be exempt as well). The manner in which you can access the protected funds often times varies from bank to bank, so be sure to consult with your own bank for specific details.

Is there anything else?

All the information above is useful for several reasons, but many times clients of Graham & Borgese also want to try and get their account(s) released as quickly as possible while also resolving the underlying debt. Sometimes, filing an Order to Show Cause doesn’t do that. For that reason, our attorneys take a holistic approach to resolving your consumer law-related issues. Not only do we want to help you resolve your short-term issue as quickly as possible, but we also want to ensure that you are not going to be later subjected to different types of problems related to the same debt.

If you are dealing with a frozen bank account and want guidance on what to do next, don’t hesitate – call an attorney at Graham & Borgese. Put our years of experience handling thousands of consumer law issues to work for you. Our consultations are free and we do not try to pressure you do something you’d rather not do. There is a solution to your problem that best suits your needs. Let us help identity that solution and work to attain your goals.