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How long does it take to unfreeze a bank account?

how long does it take to unfreeze a bank account

The time it takes to unfreeze a bank account depends on the reason the account was frozen. Technical glitches or errors may just take a few hours or days to resolve, while more expensive issues may take weeks or more. 

Has your bank unexpectedly frozen your bank account? Frozen money can completely disrupt your finances. When this occurs, you may ask, “How long does it take to unfreeze a bank account?” Learn why financial institutions initiate a freeze, how long a bank can restrict that account and how you can regain control of your account.

Why Are Bank Accounts Frozen?

Bank accounts can be frozen by consumers or by the bank. If you lost your debit card or want to prevent transactions temporarily, you can request a freeze. You can stop this type of freeze anytime by logging into your account via a computer or mobile app.  

A bank-initiated freeze can occur without the account holder’s permission. A freeze typically occurs due to suspicious activity or a court judgment from debt collectors. A creditor typically hires a debt collector to recoup the outstanding debt. The bank has to issue a notice before initiating a freeze. In addition, creditors and debt collectors cannot freeze an account immediately without first obtaining a court judgment. 

Financial institutions must file a suspicious activity report (SAR) when there is suspicious activity on a bank account. The requirement of reporting activity to the US Treasury began in 1992. Bank employees raise alerts for potential money laundering, terrorism funding, criminal activity, and political corruption. 

Suppose a banking account displays large cash transactions that are out of the ordinary. In that case, the financial institution will file a currency transaction report (CRT). A CRT can result in a SAR filing if the anti-money laundering staff flag suspicious activity. 

Why Was My Banking Account Frozen? 

ScenarioAction Required Estimated Time to Unfreeze Notes 
Technical GlitchContact customer service for resolution. Few hours to 1 day.The time depends on the complexity of the issue and the bank’s response time. 
Account Verification Submit necessary documents for account verification. 1 to 3 days.Ensure that all submitted documents are accurate and complete. 
Disputed Transactions Resolve disputes with merchants or other parties. 7 to 30 days. Resolution time depends on the nature of the dispute and cooperation from all parties involved. 
International Transactions Verification of international transactions by the bank. 3 to 7 days. Banks might require additional time to verify international transactions due to different time zones and verification processes.
High-Value Transactions Bank’s review and verification of large transactions. 2 to 5 days. High-value transactions might be subject to additional scrutiny by the bank.
Account Dormancy Reactivation of dormant accounts by fulfilling bank requirements. 1 to 5 days. Dormant accounts might require additional verification processes. 
Legal or Compliance Review Completion of legal processes or compliance reviews. Varies (could be weeks or months). The time frame is subject to legal processes and can be unpredictable. 
Security Concerns Resolution of security issues such as suspected identity theft. 5 to 30 days. The time frame depends on the nature of the security concern and the necessary actions to resolve it. 

What Are the Restrictions on a Frozen Banking Account?

If your banking account is frozen, you cannot access your checking or savings account. According to the FDIC, approximately 81.5% of Americans have a bank account.1  So, bank account freezes is an issue that can potentially affect most of the nation. If this happens to you, you will not be permitted to withdraw money using a debit card or electronic transfer. You may still be allowed to deposit money into your accounts, but this may not be an ideal option. 

Any money you deposit into a frozen account will become frozen and inaccessible. If you receive income through direct deposits, you need to stop those automatic payments, so you have access to your employment wages. 

How Long Does It Take To Fix a Frozen Bank Account? 

You may want to fix the situation quickly if you have a frozen account. The good news is that there are several ways an account holder can unfreeze a bank account. However, depending on the reason for the freeze, you may have to wait an extended period. 

Fix a Freeze Due To Suspicious Activity

A computer-generated alert of unusual activity may result in a frozen bank account. Suspicious activity can involve any transactions that appear unusual, such as a large deposit from a new source. 

In the event your bank freezes a bank account, you can call or visit a local branch to explain the recent activity. Depending on your bank, you may have to make an in-person visit to confirm your identity if the bank suspects fraudulent activity. Your bank account will be unfrozen immediately if your financial institution is satisfied with your explanation.

Fix a Freeze Due To Unpaid Debts

If you have unpaid debts to a creditor or debt collector, you may face a lawsuit. It would be best if you appeared in court. You risk losing by default if you do not appear for a court summons. 

When you appear in court, the creditor will attempt to convince the judge that you willingly signed a loan agreement and that they are entitled to a money judgment. A judgment is a document issued by a court that states the creditor won a lawsuit and is entitled to a specific monetary amount. If a creditor gets a money judgment against you, they have the authority to freeze your bank account.  

You will likely not receive an advance notice of a frozen account initiated by a creditor. Although a bank must tell you that a court issued an order to freeze your account, it may be too late to access your money by that point. Generally, a bank account remains frozen until you pay the debt or file a motion to vacate. 

A motion to vacate is a specific request to a court to withdraw the judgment against you. You must file a motion to vacate within a reasonable timeframe after a court issues a judgment and provide a valid legal reason. An account holder with a frozen account typically has thirty days to one year from the date of judgment to file a motion to vacate. 

You can expect a court to grant a motion to vacate when you did not receive proper service of process. For example, if you did not receive the required notice of a lawsuit or a copy of the legal documents involved. 

How To Prevent a Future Bank Account Freeze 

A frozen account qualifies as a financial emergency. Having limited or no access to your money can completely disrupt your life and cause unnecessary stress. However, there are ways to prevent a future bank account freeze. 

Deal With Debt Collectors 

Has a debt collector contacted you? Perhaps you have an unpaid medical bill or are still struggling to get rid of zombie debt. The best course of action to prevent frozen finances is to deal with debt collectors directly. But how can you deal with debt collectors when you can’t pay

Ensure the debt amount you owe is accurate and that the debt collector is legitimate. If you do owe money to a debt collection agency, you can contact them and start a payment plan. You can use an alternative payment option if the agency does not offer payment plans. Apply for bad credit monthly installment loans to easily manage to pay off a large debt over time. You can also try taking up a side job, such as dog walking, to boost your income temporarily. 

Avoid Writing Bad Checks

A bad check is a check that bounces due to insufficient funds in a personal or business account. One bad check will result in a non-sufficient funds fee (NSF), but multiple bad checks will result in fines and a frozen account. Keep track of your spending to ensure you have enough money to cover a cashed check. 

Limit Cash Deposits 

The Financial Crimes Enforcement Network (FinCEN) requires banks to file a SAR (Suspicious Activity Report) if a cash deposit exceeds $10,000. Suppose you win the lottery or claim a lump sum from an inheritance. It is a good idea to inform your bank before initiating the deposit to prevent an unexpected freeze. 

Use Direct Deposit for Government Assistance Funds

Certain types of funds, such as government assistance, are exempt from debt collection. It’s ideal to receive direct deposit for Social Security benefits, disability benefits, etc. If you receive a garnishment order, any government benefits deposited within two months prior cannot be frozen. Having your benefits deposited directly to your bank account ensures you have access to two months worth of benefits. 

Frozen Bank Account FAQ

What should an account holder do to unfreeze a bank account, and what are the common reasons banks freeze accounts?

An account holder should immediately contact their bank to understand the specific reasons why they chose to freeze accounts. The bank will provide guidance on the necessary steps and documentation required to unfreeze a bank account, which may vary based on the underlying issue, such as suspicious activity or legal orders.

Can a credit card issuer initiate a freeze on my bank account if I have pending dues?

Yes, a credit card issuer can initiate legal proceedings to recover dues, and if they obtain a court order, it can result in a having your bank account frozen.

Are business accounts as susceptible to bank freezes as personal accounts?

Yes, business accounts can also be subjected to an freezes, especially in cases involving suspicious transactions, unpaid debts, or legal issues related to the business.

How can I prevent suspicious transactions that might lead to a bank freeze?

Regularly monitor your account for any unusual activities, ensure secure online transactions, and report any discrepancies to your bank immediately.

Will all my accounts be frozen at once, or can the bank freeze accounts on an individual basis?

It depends on the reason for the freeze. Banks can freeze individual or multiple accounts, including accounts for business, based on the issue at hand.

Can I open a new account with another bank if my existing bank accounts are frozen?

Yes, a frozen bank account doesn’t prevent you from opening a new account elsewhere, but it might be challenging if the freeze is due to legal or financial issues.

How can I ensure that my credit card company doesn’t initiate a bank account freeze due to unpaid dues?

Ensure that you make timely payments to your credit card company, communicate any issues you might be facing in making payments, and consider setting up automatic payments to avoid missing due dates.

What kind of legal actions can lead to a frozen bank account?

Legal actions such as court judgments in cases of unpaid debts, involvement in fraudulent activities, or suspicious transactions can lead to a freeze on an account.

Can a frozen account affect joint accounts, and how does it impact the joint account holders?

Yes, a frozen account can affect joint accounts. Both account holders might be restricted from accessing funds, depending on the reason for the freeze.

How can I safeguard my accounts for business from potential bank freezes?

Regularly review and reconcile transactions, maintain clear financial records, and ensure compliance with legal and financial regulations to safeguard accounts for businesses from potential freezes.

A Word From CreditNinja About Frozen Financial Accounts

Nobody wants their checking account frozen. A frozen account could be an inconvenience at best and a crippling financial disruption at it’s worst. If you have found yourself in a situation where your checking account is frozen and you need funds to get through a financial emergency, consider a personal loan with the help of CreditNinja. With CreditNinja bad credit loans, borrowers could enjoy great benefits like: 

  • Fast funding* 
  • Bad credit OK
  • Flexible repayment options 
  • Special refinancing deals 
  • Easy online application process 

Check out our brief inquiry form today and see how CreditNinja could help you out! 

References:
1. FDIC National Survey of Unbanked and Underbanked Households | FDIC
2. What’s Suspicious? Here’s How Banks Apply the Smell Test
3. Frozen Bank Accounts
4. Motion to Vacate Judgment

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