Table of Contents

What Is a Frozen Account? What Causes It and How to Unfreeze It

By

Julia Kagan

Updated January 23, 2026

Reviewed by

Erika Rasure

Fact checked by

Vikki Velasquez

Frozen Account: A bank or investment account from which no withdrawals or purchases can be made. — Investopedia / Paige McLaughlin

What Is a Frozen Account?

A frozen account is a bank or investment portfolio that prevents any outgoing transactions, such as withdrawals or purchases. This typically happens due to a court order, often prompted by unpaid debts or suspicious account activity. The financial institution may also initiate an account freeze if it suspects illegal actions. Account holders may still make deposits during a freeze, but the ability to access funds is often restricted until the underlying issues are resolved. Understanding why accounts are frozen is essential for regaining control and avoiding future freezes.

Key Takeaways

A frozen account restricts account holders from making withdrawals or purchases, typically due to a court order or suspicious activity.
To unfreeze an account, the holder usually must satisfy outstanding debts or resolve the issues that led to the freeze.
Automatic payments are halted during an account freeze, so alternative arrangements must be made to cover expenses.
Accounts can also be frozen due to illegal activities, at the request of the account holder, or if the account holder is deceased without an appointed executor.

Understanding How Account Freezes Operate

Frozen accounts do not permit any debit transactions. When an account is frozen, holders can't make withdrawals, purchases, or transfers, but may still deposit money. The freeze has no fixed duration and is lifted once the issue is resolved.

When a bank account is frozen, it may be because of money owed to another individual or business. Account freezes may also be the result of outstanding debt to the Internal Revenue Service (IRS). Any creditor that has a court judgment against an individual can have that person's bank account frozen. In fact, the creditor can actually freeze the account for up to twice the amount that they're owed.

In order to process an account freeze, banks and investment firms must first receive a court order. At that point, the financial institution is legally bound to place a freeze on the account. Sometimes, the institution can temporarily freeze the account without a court judgment.

When the institution sends a notice of the freeze to the account holder, that person should contact the lawyer at the phone number listed on the notice. If they didn't receive a notice after the account was frozen, they can call the bank and ask for the lawyer's name and phone number so they can attempt to settle the account.

Important

Financial institutions must freeze accounts immediately after they receive a court order to do so.

Common Causes for Account Freezes

Accounts may be frozen or have a hold placed on them for a number of reasons. Regulators or a court may freeze accounts if the account holder fails to disburse payments that are due or commits other violations.

Brokerage accounts can also be frozen by the Federal Reserve Board under Regulation T, which relates to cash accounts and securities purchases. This 90-day freeze prevents "freeriding," where an investor buys and sells securities without paying fully. During such a freeze, the investor may continue to purchase securities. However, they must pay for the trades in full on the date they are made.

Banks might freeze accounts over suspicious or non-compliant activity, possibly involving fraud or actions by someone other than the account holder, like a scam artist. For example, an unusually large withdrawal or transfer to an overseas bank could signal an issue. Accounts may also be frozen if the owner passes away and an executor or administrator has yet to be named for their estate.

Accounts may be frozen if an individual is involved in crimes, affecting even jointly-held accounts with spouses or partners. An account can also be frozen if its owner is suspected of illegal activity. Additionally, account holders can request that the bank or institution freeze their accounts. They might want to do that, for example, if they're concerned about someone making unauthorized withdrawals.

Steps to Unfreeze a Frozen Account

Account freezes are temporary and usually require resolving the issue that caused them. Typically, this means paying off any outstanding debts, although creditors may agree to a reduced settlement.

In cases of suspicious activity, the bank generally lifts a freeze order after an investigation is complete. If illegal activity is detected or if the account holder is found to be complicit in any fraud involving the account, the account may be permanently closed, and any remaining funds may be seized.

What Happens to Automatic Payments During an Account Freeze?

Any bills that you have arranged to be paid automatically from your account, such as utilities or a monthly gym membership, will stop while the freeze is in effect. In this case, you will need to pay those bills in some other way.

What Is a Levy?

A levy is another way that an entity, such as the IRS, can attempt to collect money it is owed, typically by seizing the debtor's bank accounts or other assets. The account will be frozen until the creditor has taken its share, perhaps all of it.

What Is a Credit Freeze?

Not to be confused with an account freeze, a credit freeze allows you to instruct credit bureaus not to share your file with anyone. This is often used to keep identity thieves from applying for credit in your name.

The Bottom Line

Bank and investment accounts may be frozen for a variety of reasons. If you discover your account has been frozen, contact the financial institution or its legal representative as soon as possible to find out what you need to do to have the freeze lifted.

Article Sources

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Internal Revenue Service. "What is a Levy?"
The Langel Firm. "New York Banks Freeze Double the Judgment Amount. Why?"
U.S. Securities and Exchange Commission. "Updated Investor Bulletin: Trading in Cash Accounts."
Consumer Financial Protection Bureau. "What is a Credit Freeze or Security Freeze on My Credit Report?"