An account freeze prevents any transactions from occurring in the account.
There are three circumstances under which a bank, credit union, or brokerage can freeze an account. First, the financial institution can freeze an account if it believes there is suspicious activity on the account or the account is used for illegal acts. Second, the government can ask a bank to freeze an account if it has evidence the account is used for illegal activity. Finally, a account freeze can take place when the account owner dies.
It is not possible for a third party, such as an ex-spouse to effectuate an account freeze.
Levy bank accounts
You may be thinking of what is called a "levy" or "garnishment." A levy means the judgment-creditor has the right to take whatever money in a debtor's account and apply the funds to the balance of the judgment. The procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state's laws to find if a bank account can be levied. See the Bills.com resource State Consumer Protection Laws and Exemptions for an overview of each state's rules.
To get a levy, garnishment, or lien, a creditor must first get a judgment from a court of law. (See the Bills.com resource Collections Advice to learn more about this process.)
Generally speaking, pensions are exempt from garnishment or levy. The exceptions are child support and tax liens, and other relatively rare circumstances. See the Bills.com resource Can a creditor be allowed to do Social Security garnishment? to learn more about the protections the federal government has put in place for beneficiaries of Social Security benefits.
If your pension or Social Security benefits are commingled in a an account with funds from other sources (such as gifts from friends or investment income) the contents of the entire account can be levied. Therefore, it is imperative that people who are receiving a pension or Social Security benefits have those funds deposited in an account that receives deposits from the Social Security Administration and/or the pension administrator. Insist that the bank or credit union annotate the account with the message that the source of the funds in that account are pension and Social Security benefits only, and cannot be garnished or levied.
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