Does a Credit Card Company Have to Notify Me Before Freezing My Bank Account?

by Jerry Shaw
Contact the creditor if you're worried about having your account frozen.

While a creditor doesn’t have to contact you before freezing your bank account, it has to take some legal steps first. Creditors must get a court judgment against you for failure to pay a debt, then request a court order to freeze your bank account. Your bank will notify you when it receives the court order, but by then it's too late. Your account will already be frozen.

Legal Claim

Credit card companies are allowed to freeze your account, an action also known as a bank levy, after a judgment because you legally owe them money. Remember, you signed an agreement with the company to make payments on your debt, usually paying a required amount each month. The creditor can take the money you owe out of your bank account when a court officially decides the company has a legitimate claim to that money.

Default Process

A creditor can file a lawsuit against you after other methods of getting you to pay up have failed. When you stop making payments on your credit card you'll start receiving notices or phone calls asking you to get back on track. Creditors usually consider your account in default after a few months because you haven’t fulfilled your obligation to pay. They file lawsuits as the final measure in getting the money owed to them. How much your creditors can take from your account depends on the laws in your state.

Account Exemptions

People are still entitled to a certain amount of income for living expenses even if they have outstanding or overdue debts. In Illinois, for example, debtors have an exemption that allows them to keep as much as $4,000 in their bank accounts. Check with an attorney about the laws and exemptions in your state. Government assistance deposits, such as veteran’s benefits and unemployment compensation, are also protected if your account is frozen. You can unfreeze exempted funds from your account by filing a “vacate the default judgment” request with the court.

Settlement Talks

You can’t tell when, or if, a creditor will freeze your account, but you should protect yourself as soon as possible if a court has ruled against you in a lawsuit. Negotiating with your creditors to set up a payment plan helps avoid a bank levy. Contact your creditor before your owed debt reaches the court stage or even after a court judgment to reach a possible settlement.

About the Author

Jerry Shaw writes for Spice Marketing and LinkBlaze Marketing. His articles have appeared in Gannett and American Media Inc. publications. He is the author of "The Complete Guide to Trust and Estate Management" from Atlantic Publishing.

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