Your bank account can be locked for multiple reasons, which can mean trouble for your finances. When a bank account is locked or frozen, you can’t withdraw money, transfer money, or access your account during the lockout period. If it’s a checking account, you may not be able to use your debit card, either.
Although the rules for freezing a bank account can vary by financial institution, a few scenarios can lead to a frozen bank account. Some of the most common reasons include illegal activity, a court order for unpaid debts or taxes, a clerical error, or because the bank suspects a criminal gained access to your personal information.
It can be frustrating to be locked out of your finances without knowing why. For further details on reasons why your bank account is frozen, keep reading.
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If a bank suspects that an account holder is engaging in illegal activity like money laundering, funding terrorism, or trying to avoid paying taxes, it can lock an account while it conducts an investigation.
Under federal law, banks are required to help the government prevent and discover criminal activity. Suspicious transactions — like repeated daily deposits over $10,000 or large sums of money being quickly moved in and out of accounts — will likely lead to an account lock. The account stays locked until the bank, and potentially law enforcement, are satisfied with how the account is being used and funded.
Writing bad checks
Writing bad checks can also result in your bank account being locked. You likely won’t see your bank account frozen if you miscalculate when a deposit becomes available and accidentally bounce one or two checks. However, you will probably have to pay a fee of up to $35 per check, depending on the bank, for all checks returned for insufficient funds.
It’s considered fraud if you knowingly and repeatedly bounce checks or try to cash personal checks when you know you don’t have funds available. The bank can freeze your account while it investigates. If the bank believes there is a pattern of fraud, it can close your account altogether and, depending on your state’s laws, report your account activity to the police.
A security freeze
Being the victim of identity theft can take a toll. Not only is it scary to consider someone gaining access to your personal information, but you may also have to deal with financial consequences, including a locked bank account.
Many of the best banks track their customers' broader spending habits. If the bank notices a large amount of unusual activity or a large purchase made out of state, it may flag the account and enact a security freeze to prevent a cybercriminal from draining your money before you notice and report it.
While this can be helpful if you are the victim of identity theft, it can also be inconvenient if you just went on vacation and forgot to inform your bank. If you plan to travel or make a large purchase shortly, contact your bank beforehand so your account isn’t flagged or potentially locked.
The government can order your bank to lock your account in certain circumstances, such as if you fail to make tax payments or repay your student loans.
In the case of unpaid taxes, the Internal Revenue Service (IRS) can issue a tax levy against you, which is a legal seizure of your property to secure payment for a debt. While this is an extreme action after the IRS has sent multiple communications, it can seize your property, including having your bank lock your account for unpaid taxes.
The IRS can levy property that is yours (even if it’s held by someone else) such as your bank accounts, retirement accounts, wages, rental income, and even the cash loan value of your life insurance. The IRS can also seize and sell your physical property, like your car, boat, or house.
A similar situation is true for student loans. If you default on student loans held by the Department of Education (such as a direct loan or a Federal Perkins Loan), then the Department of Education can order your employer to withhold up to 15% of your disposable pay without taking you to court.
The Department of Education can also request that the Treasury Department withhold money from your federal and state income tax returns, Social Security payments (including disability benefits), and other federal payments.
To avoid having your bank account frozen or your wages garnished, contact the IRS or your student loan servicer to work out a payment plan or request an extension before any deadlines are missed and you default on your payments.
Unpaid debts to creditors
One late bill payment likely won't result in your account being frozen, although it might negatively affect your credit score. However, if you have a court judgment entered against you by debt collectors for an outstanding auto loan, mortgage, or personal loan, your creditors may be able to freeze your bank account.
When a bank receives an order to freeze your account from a court, they must notify you, but the bank will likely freeze the account before the notification reaches you.
Once your account is frozen, any automatic payments or checks that haven’t been cashed may be refused payment by your bank, resulting in insufficient funds fees, even if the money is just sitting in the frozen account.
Even funds in joint accounts can be frozen. If your partner has a judgment entered against them for unpaid debts, your joint funds may be locked until the debt is paid, even if your partner incurred the debt without your knowledge.
Some funds, such as Social Security retirement, SSI, and veteran’s benefits, are exempt from being frozen by creditors. If your account was frozen and it has these funds in it, file a claim of exemption with your bank as soon as possible.
Unpaid spousal or child support
If you have a past-due child or spousal support, a bank account can be frozen until the past-due amount has been paid off, though the amount and length of time vary by state.
For example, The Florida Child Support Program will collect past-due support from a bank if the amount is greater than $600. In New York state, the child support program can order an account frozen if the amount due is over $300 and more than two months late.
Even federal benefits usually exempt from garnishment, like Social Security, veterans benefits, and military survivor benefits, can be seized if you have not paid child or spousal support.
If you forget about or leave a bank account dormant for a long time, your bank may lock and close it after continued inactivity.
Having a bank account declared dormant doesn’t happen overnight and generally takes three to five years, depending on the bank policies and your state. Banks may start charging an inactivity fee after 12 months of no deposits, withdrawals, or transfers, and earned interest doesn’t count since the account holder didn’t initiate it.
A bank account can also be frozen if your bank fails or if there is an administrative error.
Although the best checking accounts are insured by the Federal Deposit Insurance Corp (FDIC), you may still find your accounts locked if the bank where you hold your money fails. The FDIC must make payments of insured deposits as soon as possible after the failure, but your funds may remain unavailable while the dust settles.
If a bank makes an error, like crediting someone else’s deposit to your account by mistake, your account may temporarily be locked while the error is corrected. Some banks only freeze the amount of the funds deposited, while others just place a hold on the deposit amount.
Each bank policy is different, so read the account rules provided when opening a new account.
How can I unlock my bank account?
Unlocking your bank account depends on the reason your account was locked in the first place. If you suspect your account was locked due to a bank error, contact the bank immediately to explain the problem and provide any requested documentation.
If your account is locked due to suspicious activity, the bank will need to investigate before the account can be unlocked or any further action is taken. In the case of locked accounts due to debts owed to the government or a creditor, your account may remain locked until the debt is satisfied.
Can a bank unlock your account without notice?
Generally, a bank can lock or unlock your account without advanced notice. Although a bank may unlock an account without notifying you beforehand, they will likely inform you at some point, depending on the reason your account was locked in the first place.
Read the deposit account agreement to understand your bank’s specific policies and your rights or obligations when an account is frozen.
How long does a bank account stay locked?
The length of time for a bank account freeze depends on your specific situation. For a bank error, the account may be locked for 7 to 10 days, though it could be potentially longer. If the problem is more complicated, the account may stay locked for up to 30 days or more.
If a judgment is entered against you for an unpaid debt or loan, some of your funds may be garnished until the amount is paid back. Some funds are automatically protected from garnishment, but consider consulting an attorney to help you with your particular circumstances.
Although there are several reasons why your bank account might be locked, like illegal activity, unpaid debts or owed child support, or even bank error, it’s important to understand the rules and policies of your specific bank.
If you suspect your account has been or might be locked soon, don’t wait to take action. Contact your bank to see what steps must be taken and confirm they haven’t made a mistake. Check your bank statements for any unusual activity that might have caused the account lock.
If your account is locked and you have any outstanding outgoing payments, contact anyone you wrote checks to and explain the situation. Be sure to cancel or pause any automated payments too.
If your account is locked due to debt, contact the creditor or loan servicer to create a repayment plan. You may even need to consider consulting an attorney for legal advice to help you determine the next steps.
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