My sister-in-law was notified by her bank that her checking account was "frozen" by one of her creditors. This is the account where she receives direct deposit of her Social Security and pension. What can she do?
First, it is important to understand that it is a lengthy process between owing a bill and having your account frozen. Therefore, we should consider the old adage, "An ounce of prevention is worth a pound of cure." In order for this to happen to your account, a creditor must first obtain a judgment from Court. Almost every business farms this out to a lawyer’s office (or a collection company with a lawyer) to start the action in Court. Since this is time consuming and expensive for the creditor, they would much rather try to collect the debt directly from you for as long as possible. Since keeping the debt away from the lawyer or collection company is good for both you and the creditor, there are several common sense ways of achieving this goal.
First, of course, do not ignore your bills. If you can’t pay the entire bill, pay a part. Almost every company would rather work out a payment plan than send it on for collection. Don’t be afraid to call them or have someone call them on your behalf to work things out. If it is a credit card, minimum payments are always preferable to no payments. A phone call and some payment will usually suffice. Remember to always get the name of whomever you speak to on the phone, and ask if they can follow up with a letter stating what your agreement is and be sure to pay as agreed. If you cannot make your payments as agreed, call again. There are also many consumer credit bureaus (credit counseling agencies and debt relief agencies) that can help you make such arrangements.
If it has gone past this point and you are served with a Summons, this means that they have given it over to an attorney and they are commencing a lawsuit against you. Never, never, never ignore a Summons. If you do (and often they count on this), it is a simple procedure for them to get a default judgment against you which will yield the dreaded results. A legal Answer is required within twenty to thirty days depending on how you were served. Therefore, if it is for a large amount, call an attorney to have the Answer submitted. If it is a relatively small amount, take the following two steps, either directly or with someone’s help: 1) Call the attorney’s office listed at the end of the Summons and request an extension of at least thirty days to submit an answer with written confirmation; 2) Try to work out a deal. They will usually take a payment of about 50% or give you a payment plan for the full amount. While bankruptcy is sometimes an option, it is beyond the scope of our current discussion. If you are overwhelmed by your debts you should contact a consumer credit bureau, credit counseling agency, debt relief agency, or an attorney which specializes in debt relief.
Now, finally, to your question. Let’s assume that you ignored the bills, ignored the Summons, a default judgment was obtained, and your account is now frozen. What can you do? For this, I called upon our expert in debtor/creditor law, Michael L. Carey, Esq., of Jacobowitz and Gubits, LLP. Mr. Carey advises that you obtain the name of the attorney that has acquired the judgment and issued the restraint on your account. This can be supplied by your financial institution. Contact the attorney and advise the attorney that the money in your account is your Social Security payment and is not subject to restraint. Many times the attorney will release the account. However, if the money in the account is not only Social Security and therefore subject to restraint, you will have to negotiate with the attorney or retain your own attorney to negotiate on your behalf.
As you might guess, having your account released may take some time, be very inconvenient and costly, and even result in your checks bouncing. You may have to open a new account meanwhile to receive your social security and pay your bills. Clearly, if at all possible, prevention is your best choice.