What Can I Do If My Credit Card Company Freezes My Account?

What Can I Do If My Credit Card Company Freezes My Account?

Last updated: June 2009

The following questions were submitted to John Roska, an attorney/writer whose weekly newspaper column, "Q&A: The Law," runs in the St. Louis Post-Dispatch (Illinois Edition) and the Champaign News Gazette.  This article was published on August 27, 2008.

Q:    My bank account was frozen by a credit card company who sued me in Small Claims court.  My bank says they must hold the money in my account, and can’t do anything but wait for instructions from a judge.  The lawyer for the credit card company won’t talk to me.  Is there anything I can do about this?

A:    Probably.  If there’s less than $4,000 in the account, you can claim it as “exempt,” and make the credit card company unfreeze it.  (If there’s more than $4,000, you can unfreeze $4,000.)  If you can’t talk to the creditor to get them to agree to unfreeze it, you can go to court to ask a judge to make them.

Both Federal and Illinois law “exempt” certain things from collectors and creditors.  The basic idea is to leave you something to live on, and stop creditors from leaving you completely destitute. 

Exempt income and property is therefore legally protected, and completely off limits to creditors.  They can’t touch it.

It’s important to understand creditors can’t go after your income and property until after they’ve gotten a judgment against you.  That means the creditor’s filed suit, you got served with court papers, and a judge has decided once and for all that you owe something. 

The judge’s decision turns the creditor’s claim into a “judgment.”  That can occur by “default,” because you don’t show up to fight the claim, or happen after you’ve contested the case at a trial.

So, it’s only at the “post-judgment” phase of a collection case that a creditor can try to garnish wages, seize assets, or freeze bank accounts. 

Illinois law gives all debtors what lawyers call a “wild card” exemption.  It’s a wild card because you can use it to protect up to $4,000 worth of any personal property you choose—including money.  You can therefore use your wild card exemption to protect up to $4,000 in bank accounts.

For many debtors, that $4,000 protects all their money, if not everything they own.  As a practical matter, creditors just want money, and rarely bother with things (e.g., furniture and TVs), unless they’re really valuable.  That’s why bank accounts get frozen.

Some creditors will accept your—or a lawyer’s—word for it that your bank account is exempt.  They can then simply tell the bank to unfreeze your account, and release the money to you.

Other creditors are less cooperative.  In which case, you must ask your local Circuit Clerk in writing for a court date, so you can tell a judge that the money in your bank account exempt.  Any kind of letter or statement, identifying the court case, and saying that you want a court date to claim exempt property, should do.

Then, the law says that “the Court will provide a hearing date and the necessary forms” that you must fill out and send to the creditor, so that they know about the court date. 

Note:  You must make your written request to claim the exemption before the deadline set out in the court papers you should have received.  Those papers are copies of either a “non-wage garnishment,” or a “third-party citation,” that were served on your bank.  They require the bank to file something in the court case by the stated deadline, telling the judge whether they’re holding any of your money.
 

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