How to Avoid a Bank Account Freeze: A Professor’s Legal Guide

When a creditor files a lawsuit against you, the clock starts ticking on your financial security, and the most devastating outcome is often a sudden bank account freeze. In my practice, I’ve seen countless individuals ignore a summons only to find their liquid assets locked overnight. Once a creditor obtains a judgment, they don’t just ask for payment; they secure a writ of garnishment that forces your bank to freeze every dollar in your account. Understanding how to navigate a creditor lawsuit is key to protecting your finances.

While certain income is protected by federal law, the process of unfreezing an account is a legal hurdle that can leave you unable to pay rent or buy groceries for weeks. In this post, I will break down the mechanics of bank levies and how to safeguard your assets before the court order arrives.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on January 18, 2026.

Listen: The Professor’s Audio Briefing.

Key Strategies to Protect Your Bank Account

• Diversification: Opening a bank account at a new, unrelated bank can break the creditor’s “link” to your liquid assets.
• Separation of Income: Never mix protected funds (like Social Security) with other deposits.
• Proactive Defense: Filing for bankruptcy before a levy can prevent the freeze entirely through the automatic stay.

What the Creditors Already Know

Creditors typically have your bank information because you’ve made payments to them in the past. If they sue you and win, they will target that specific account.

Professor’s Strategy: If you realize a judgment is imminent, consider opening an account at a completely different financial institution. Creditors generally receive court orders for specific banks. While they can eventually find new accounts through post-judgment discovery, moving your funds to a new bank buys you vital time to negotiate or file for bankruptcy protection.

The Friday Paycheck Nightmare

Imagine it’s Wednesday and your account is frozen. You have a paycheck direct-depositing this Friday to cover your mortgage or rent. In this scenario, a bankruptcy filed after the freeze does not automatically release the funds; it only stops future collection.

If you are “judgment proof” or simply cannot file for bankruptcy yet, consider the “old school” approach: ask your employer for a physical check. While many companies have moved to 100% digital payroll, explaining a legal hardship may allow you to bypass the direct deposit system and use a check-cashing service until your legal issues are resolved.

Professor’s Note: Do not confuse being judgment proof with the general belief of debtors that a lawsuit won’t take your home away. While most states will protect your homestead property, it does not prevent a creditor from placing a lien on your home that silently eats away at your equity. I discuss this issue in detail in this prior article.

Social Security Income and the “Commingling” Trap

Under federal law, Social Security benefits are protected against private creditors. If your bank receives a freeze order, they are required to look back at the last two months of transactions. If they see direct deposits from the Department of the Treasury, they must protect a “protected amount” (usually two months’ worth of benefits).

However, this protection fails if you commingle funds. The bank will not try to decipher or trace what funds are protected or any portion thereof.

 The Safe Way: A dedicated account that only receives Social Security. The bank can easily verify these funds and reject the freeze.

The Risky Way: Depositing a side-hustle check or a spouse’s income into the same account. Once funds are mixed, the bank may freeze the entire balance, forcing you to go to court to “trace” and prove which dollar belongs to which source. This is further complicated by the fact that you will not have the funds until that hearing is scheduled, and depending on the court’s calendar, that can be weeks or months away.

The Joint Account Danger or Commingling of Funds

In a joint checking account, the law often presumes that all money belongs to the debtor. If a creditor sues you, they can freeze the entire account, even if 90% of the balance was deposited by your spouse.

Professor’s Note on Divorce vs. Bankruptcy: Don’t confuse “separate accounts” with “separate property.” While keeping separate accounts can protect your spouse’s income from your creditors, those funds may still be considered marital assets in a divorce proceeding. In the world of bankruptcy and debt collection, the goal of separate accounts is purely procedural protection, not a change in ownership.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

Updated initially on February 2, 2025.