What is a Frozen Account?
A frozen account refers to a situation where an individual is unable to withdraw money from a bank account due to a court order.
Frozen Account Example
A bank account is commonly frozen when the account holder owes money to another party. To freeze a bank account, the creditor must convince a judge that a court order is appropriate due to the facts of the case.
For example, Bob buys a new computer from company XYZ, but defaults on the full payment. Company XYZ hires a lawyer to get a court order to freeze Bob's account for a specific period of time. Bob then receives notice from his bank that the account has been frozen. The notice will usually include the name and telephone number of the lawyer so that Bob can contact the lawyer and try to settle the matter.
Why Frozen Accounts Matter
The ability to legally freeze someone's account gives creditors further assurance that they will receive payment for the goods or services purchased by the person who defaults on the payment.
In addition, suspicious and suspected fraudulent activity might also cause banks to freeze an account. For example, an abrupt exorbitant withdrawal or transfer to a foreign account may indicate an account has been compromised. If an individual is found guilty of a crime or the owner is suspected of illegally activity, their accounts may be frozen. Accounts may also be frozen if the owner passes away and an administrator has yet to be assigned.