What is a Frozen Account?

Understand why your account is frozen. Take steps to unfreeze it and regain access to your funds quickly and easily.
Frozen Account
3 min
16-April-2024

Have you ever encountered a situation where you tried to access your bank account but were unable to do so? This could be due to a frozen account. A frozen account is a bank account that has been restricted by a financial institution or a court order, preventing you from withdrawing or transferring funds.

What is a frozen account?

A bank account or an investment account that has no outgoing transactions permitted is known as a Frozen Account. This prohibition is either due to a court order( under section 102, CrPC) issued to the account holder or measures taken by the financial entity where the account is.

Reasons accounts may be frozen

There are several reasons why your bank account might be frozen. Here are some of the most common:

  • Suspected illegal activity: If the bank suspects your account is being used for illegal activities like money laundering or fraud, they may freeze it to prevent further transactions while they investigate.
  • Unpaid debts: If you have outstanding debts, such as unpaid credit card bills or overdue loans, a creditor may file a court order to freeze your account and recover the owed funds.
  • Unpaid taxes: Similar to unpaid debts, the government may freeze your account to collect any outstanding taxes you owe.
  • Identity theft: If there's a possibility that your identity has been stolen and your account is being used fraudulently, the bank may freeze it to protect your funds.
  • Court order: A court order, unrelated to the reasons mentioned above, may also lead to a frozen account. This could be due to a legal dispute, inheritance issues, or bankruptcy proceedings.
  • Suspicious activity: Unusual or suspicious activity in your account, such as a sudden surge in large deposits or withdrawals, could trigger a freeze while the bank investigates.

How to unfreeze an account

If your account is frozen, here is what you can do:

  • Contact your bank: The first step is to contact your bank and inquire about the reason for the freeze. They can provide details and guide you through the necessary steps to resolve the issue.
  • Gather documentation: Depending on the reason for the freeze, you may need to provide documentation to your bank. This could include proof of identity, proof of income, or receipts for transactions.
  • Resolve the underlying issue: Address the underlying reason for the freeze. This might involve paying off outstanding debts, cooperating with a fraud investigation, or resolving a legal dispute.
  • Wait for resolution: Once you have addressed the issue, the bank will review your case and decide to unfreeze the account. This process can take some time, so be patient.

What happens to automatic payments during an account freeze?

Since no withdrawals are permitted from a Frozen Account, thus any automatic fund transfers like bill payments, memberships, and even other bank loan installments face disruptions. In events where the account is frozen for a longer period, alternative arrangements should be made to prevent other failed payments, to ensure maintaining a good credit score.

What is a levy?

The legal seizure of the property of an individual on account of non-payment of taxes and outstanding debts by the IRS is known as a levy. The bank account is frozen till the dues have been settled by the holder. The government or the creditor settles their claims by recovering money from the Frozen Account.

What is a credit freeze?

A credit freeze is when an individual requests the credit authorities to restrict the sharing of his/her credit information. This request is made to prevent scamsters from using the credit information of the applicant to open bank accounts, take loans, and indulge in any other fraudulent financial activity.

Conclusion

A Frozen Account can be frustrating and throw your entire schedule off balance. There are so many reasons known and unknown that can lead to this disruption. Yet, instead of panicking, you should take the necessary preventive actions at the earliest, which can be the submission of necessary documents, payment of outstanding dues, and legal action as and when necessary. Another point to consider, to avoid such a hassle is to operate an account with a bank that offers hassle-free account operations, and robust and proactive customer service, especially during a crisis.

If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.85% p.a.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.