Today, you tried to use your debit card for a normal purchase, but your payment was declined. You called the bank and found out your accounts are frozen. Is this scenario an effect of dissolving your marriage? Chances are, it is. Frozen assets during divorce are not uncommon.
Key Takeaways
Why Courts Freeze Bank Accounts During Divorce
The court has the power to freeze your bank accounts and other marital assets when you’re in the middle of a divorce. We’re not just talking about the house, cars, and furniture. Marital assets can include insurance policies, bank accounts, inheritances, and more. It might be inconvenient, but this action helps the court ensure your assets do not change and are appropriately divided.
How the Court Freezes Assets
When a couple files for divorce, the court may immediately issue an Automatic Temporary Restraining Order (ATRO). Although “restraining order” is in its name, an ATRO during divorce has nothing to do with abuse. Instead, it does the following:
Prevents either party from selling, transferring, or putting a loan against marital property
Stops the borrowing against or selling of insurance policies that one spouse holds for another
Prevents either party from changing beneficiaries on life insurance, health insurance, retirement accounts, and wills
Stops either party from making changes to bank accounts
Prevents either party from destroying or attempting to hide assets
An ATRO is particularly useful in high net worth divorce cases. One party might have held more power over all of the assets throughout the duration of the marriage. In this scenario, an ATRO is a protective mechanism to ensure one spouse does not prevent the other from accessing assets.
Freezing assets can also help minimize expenses by leaving things ‘as-is,’ thus reducing the costs of tracking down assets. An ATRO creates a financial snapshot that attorneys and accountants can use to wade through the division of property.
In some instances, the court will automatically issue an ATRO. In others, one of the two divorcing spouses will need to request the order. Not all couples may have an ATRO during their divorce. It’s best to have a conversation with your attorney about the benefits of frozen assets during divorce.
Modifying the Order
If you’re involved in a high net worth divorce and find that you don’t have the funds that you need to maintain your monthly bills, a divorce attorney can help you get a modification approved for the ATRO. Modifications can generally happen if both spouses agree to the modification and the court approves it.
If you have questions about frozen assets during divorce, feel free to contact our firm.
Freezing assets can also help minimize expenses by leaving things 'as-is,' thus reducing the costs of tracking down assets. An ATRO creates a financial snapshot that attorneys and accountants can use to wade through the division of property. In some instances, the court will automatically issue an ATRO.
Courts Can Freeze Bank Accounts and Other Marital Assets
Although it can be highly inconvenient, this actually plays a very important piece in a high net worth divorce. It helps the court ensure that the assets are not squandered so that they may be appropriately divided during the divorce process.
Generally, a bank account is frozen because you owe someone money. So, your account could be frozen, and your money paid to a creditor if you have unpaid judgments against you or you owe taxes, federal student loans, or child support. We have some excellent attorneys serving .
There is no set amount of time that an account may be frozen. Freezes are usually lifted once the account holder satisfies the conditions that led to the freeze. When a bank account is frozen, it may be because of money owed to another individual or business.
Key Takeaway: Do not remove any funds from a joint bank account before the divorce proceedings are complete. The judge may award your spouse with a larger portion of the community property resources if you acted in bad faith. A prenuptial agreement may affect the rights you have to your financial assets.
You won't be able to transfer or withdraw money from a frozen bank account. To restore access, you may need to verify your transaction history or repay your debt.
There are four ways to open a bank account that no creditor can touch: (1) use an exempt bank account, (2) establish a bank account in a state that prohibits garnishments, (3) open an offshore bank account, or (4) maintain a wage or government benefits account.
Alternatively, you can visit the nearest bank branch and discuss the issue with the Bank Manager. Once you are aware of the reason for your account being frozen, you can address the issue. For instance, if the KYC is incomplete, you can furnish details and unfreeze the account.
However, any money deposited during the freeze will remain in the account. This halt affects withdrawals and transfers, including any scheduled payments for bills or subscriptions, meaning these payments may fail.
Account freezes can be put in place by an account holder (in the event of a lost or stolen debit card), or the bank or regulatory authority. Freezes can occur for many reasons, including suspicious activity, suspected criminal activity, civil actions, or garnishments.
Banks have the authority to freeze accounts without advance warning, particularly when urgent measures are required to safeguard assets in cases of suspected fraud or compliance with legal directives. Can money be paid into a frozen bank account? You can deposit money into a frozen bank account.
“No doubt, the statutes empower the investigation agency to request the Bank to freeze the account pending investigation and intimate it forthwith to the jurisdiction Court, but whether the power is properly exercised or not is the moot question now looming large and in the several judgments of the Courts across the ...
If it's a joint account you cannot be locked out of it. If your partner won't allow access just go to the bank and ask. The banking laws prohibit a financial institution from allowing lockouts.
Quietly closing a joint bank account is possible, but it will depend on whether you're the primary account holder and whether all parties want to close the account. State law or the terms of the account often mean you cannot remove someone else from a joint bank account without their consent.
As a result, it is possible for a creditor to garnish a spouse's bank account if their spouse owes a debt. It is difficult enough to have any bank account garnished, but when it is for your spouse's debt, it can be even more difficult to accept.
Introduction: My name is Nicola Considine CPA, I am a determined, witty, powerful, brainy, open, smiling, proud person who loves writing and wants to share my knowledge and understanding with you.
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