HELP!!! Bank account frozen

[sinister]

Please someone help me I am so stressed, My husband and I have done all of paperwork, paid our attorney and signed all of our papers for chapter 7. We received a letter from our attorney yesterday that said that the court needed a few more papers from us;the copy of my credit counseling (they had my husbands), copies of my husbands pay stubs from last month etc. I took all of that to the lawyer today and I assumed that everything was fine until later today when I tried to pay for gas with my debit card and it declined only to find out that one of my creditors has frozen our account today. We live in New York state if this helps...I didnt think that they could do this???? Help!!!!!!!

[so-beyond-broke]

Sinister:

I am from NY too and I am curious of how your bank accts were frozen? Did you already file BK? Did someone get a judgement against you prior to filing if you filed? I was always under the assumption that a creditor needed to get a judgement against you by a court before attaching your wages or your bank account or property. I think that you would need to add a little more details so that someone here can help you with your questions.

sbb

Please someone help me I am so stressed, My husband and I have done all of paperwork, paid our attorney and signed all of our papers for chapter 7. We received a letter from our attorney yesterday that said that the court needed a few more papers from us;the copy of my credit counseling (they had my husbands), copies of my husbands pay stubs from last month etc. I took all of that to the lawyer today and I assumed that everything was fine until later today when I tried to pay for gas with my debit card and it declined only to find out that one of my creditors has frozen our account today. We live in New York state if this helps...I didnt think that they could do this???? Help!!!!!!!

[SinkingFast]

Hopefully this was before close of business so you could contact the bank and learn what was going on??!!

You are the first person I've seen that said their bank acct was frozen since I've been on the Forum. I've read that it can happen, but so far no one else had experienced it to my knowledge.

Others have written about Credit Unions freezing accts when the debtor has a loan that they BK'd on. Like Credit Union checking acct and BK on the CU for an auto loan or CC.

Is your checking acct at a bank you have a CC with?? I know Chase is opening bank branches all over the country. Could a situation like that possibly be the case?? Banks will have in the fine print, a comment about cross collaterization. If you have a checking/savings acct with them and you have a CC or other loan, when you sign the papers you give the bank the right to dip into your checking/savings for the debt on the other acct.

[so-beyond-broke]

Hey Sinkingfast:

What if lets say you did have originally a Bank One Card which Chase eventually took over after you went belly up on the card (when it was still Bank 1). Then Chase who took over this card eventually charges off the account and a serious of collection agencies are now trying to collect on the debt. And lets say you have had a checking acct with Chase for years and have not had a problem with $$ being taken out of your account do you think that was Bk is filed, that the original creditor - Bank One/Chase will cause a problem? After all the acct has been charged off and they could easily find out that you have a small checking acct with them. Just curious?

sbb

[sinister]

My account is with a Credit Union, I dont know if they had a judgement before we filed as we did receive bills from them but how would I know about a judgement? Even if they did have a judgement before we filed they shouldnt be able to freeze the account should they? BTW its a small local credit union...nothing big

[so-beyond-broke]

Sinister

I don't know how credit unions work, but before someone gets a judgement against you they will usually try to sue. First they will send someone to serve you a summons and they will also mail the summons as well sometimes certified or regular mail - point is they want to make sure that you are aware of this. If you don't go then an automatic default judgement will be issued. Before it gets to the summons part they will constantly call and send letters. Sometimes they will stop their efforts and pass the debt to another collection agency and sometimes they will pursue it and sue. Speaking of this over a week ago a gentleman knocked on our door asking for my SO. Since we didn't recognize the person we didn't open the door. Anyway the guy was a process server. The guy taped the summons to the door and left. My SO later opened the door and wouldn't touch the summons which I was able to read, he then picked up the summons with a broom and tossed it down the incinerator. My SO reasoned that the server could not say that he served the summons directly to him because it was stuck to the door. A few days later the same summons came from 2 different addresses through the regular mail. My SO is suppose to answer the summons on Monday. He says that he's not and can't believe that he's being sued for a debt of 744.00 probably not including what the law firm will tack on. Right now he's judgement proof his unemployment has ran out and I am supporting him to he gets back on his feet. I told him to go anyway but you can't force the issue. That's why I filed for some much needed protection because I am not judgement proof.

sbb

My account is with a Credit Union, I dont know if they had a judgement before we filed as we did receive bills from them but how would I know about a judgement? Even if they did have a judgement before we filed they shouldnt be able to freeze the account should they? BTW its a small local credit union...nothing big

[aa06a47]

Sorry, I posted this some time ago.......Here is a good link to read. If your wondering if it is OK to leave money in a bank you also owe money to, better read this! It is from 1995 so might be outdated, but it was a Supreme Court ruling.

http://www.wallacejordan.com/publications/bank_8.htm

November 1, 1995
FINANCIAL SERVICES NEWSLETTER
U.S. SUPREME COURT VALIDATES TEMPORARY
FREEZE OF BANKRUPT DEPTOR'S ACCOUNT

On October 31 the United States Supreme Court ruled that, in certain instances, a creditor does not violate the automatic stay by freezing a bankrupt debtor's deposit account to protect the creditor's right of setoff. The facts of the case, Citizens Bank of Maryland v. Strumpf, demonstrate why this ruling is so necessary and significant.

At the time the debtor filed his bankruptcy petition, he had on deposit with the bank approximately $11,000.00 and owed the bank approximately $3,500.00 as the outstanding balance on a defaulted loan. The bank placed an administrative freeze on a portion of the account approximately equal to the loan balance and filed a motion in the bankruptcy court for relief from the automatic stay to enable the bank to exercise its right of setoff against the account. The debtor retaliated by filing a motion for sanctions and to hold the bank in contempt for violation of the automatic stay. The court first addressed the motion for contempt and ruled that the bank's action violated the automatic stay and ordered the bank to release its freeze on the account. A few weeks later, the court granted the bank's motion for relief, ruling that the bank indeed did have a valid right of setoff against the bank account. Of course, by that time no money was left in the debtor's account.

The case ultimately reached the U. S. Supreme Court, which held that the bank's action did not constitute a setoff in violation of the automatic stay. The bank had not attempted to exercise permanent control over the account when it instituted the administrative freeze, but merely sought to maintain the status quo pending a hearing on its motion for relief. The Court also was persuaded by the fact that the bank did not freeze the entire deposit account, but merely an amount sufficient to satisfy the debt owed to the bank.

The holding of the U. S. Supreme Court in Strumpf will now enable banks to freeze accounts and avoid the risk of having the debtor dissipate all of the funds in the account prior to the bank's obtaining court approval of its right of setoff. The normal requirements applicable to the exercise of setoff obviously still must be applied, a few of which are listed below:

The amount frozen must be limited to the amount of outstanding obligations owed to the bank by the debtor;

The debt owed to the bank and the bank's obligation to its depositor must be mutual obligations owing in the same capacities; in other words, an individual's deposit account may not be used to setoff against corporate debt, unless the individual has guaranteed the debt;

Joint accounts may still be setoff for the obligations of only one of the account holders, with certain limitations and so long as the deposit agreement so provides;

The debt must be "mature," that is, the lender must have accelerated future installments; and

Other restrictions on setoff, such as the inability to setoff against trust funds or IRA funds or to use setoff to satisfy debt incurred in connection with credit cards, still must be observed.

[FoolAndHisMoney]

My account is with a Credit Union, I dont know if they had a judgement before we filed as we did receive bills from them but how would I know about a judgement? Even if they did have a judgement before we filed they shouldnt be able to freeze the account should they? BTW its a small local credit union...nothing big

Are you sure that the creditor isn't the credit union freezing the account? I thought the only time they can freeze a bank account is either if they are the creditor or affiliated in some way or with a civil judgement. Is it possible you were sued and weren't aware?

[sinister]

I dont owe the cerdit union any money or any other bank...they told me it was from a hospital bill. They said the hospital froze the account.

[aa06a47]

Has the hospital taken legal action against you, 1) got a judgement against you and then 2) got a court order allowing this? If not, 3) Sue the living crap out of them, pain and suffering, emotional distress.

While the bank is still open, you need to go tell them you want to see the court order, if not, if they cannot show you this court order, then they should immediatly if not sooner unfreeze your account. When you get your money, close the account, and open one up somewhere else.

[Minnymouth]

Tell the credit union you want to see a copy of the Judgement the Court Ordered allowing the hospital to freeze your account.... otherwise unfreeze them!!

The credit union cannot freeze your account unless you owe THEM money on a loan, cc, or auto payment (past due).... Anything else they have to have a judgement and court order.

[SinkingFast]

Typically when a bank or CU freezes your acct it's because you have CC/auto loan/mortgage that your BK'ing on.

It's called Cross Collateralization. Somewhere in the fine print of the Bank acct or the loan, is a statement that if you default on the loan, the bank has the right to sieze funds from you other accts. Whether that be checking, savings, money market, whatever.

Generally, that's the only time a checking acct gets frozen when people file BK.

As others have said, you should have received some sort of contact from the Court regarding the suit and the subsequent Judgement that allegedly exists. Make the CU show you a copy of the Judgement and Court Order allowing the hospital to freeze your accts.

If they can't produce those documents, take the money and run!!