The Deep Freeze! Your Credit Card Company Just Sued You and the Bank Has Frozen Your Bank Account.

When a credit card company sues you, your bank may freeze the money in your account.  The bank employees may tell you they must hold your funds until the judge gives them instructions.

Here’s what you can do:

You have the legal right to the first $4,000 in your account.  So if you have less than $4,000 in your account, you can tell the credit card company to unfreeze your money because it’s exempt.  If you have over $4,000 in your account, you can tell the credit card company to unfreeze the first $4,000.  If the creditor won’t unfreeze your funds, then you can go to court and ask the judge to issue an order unfreezing your funds.

Illinois law allows you to keep enough money for living expenses, which is why the first $4,000 in your account is exempt.  This stops creditors from draining you dry.  Your first $4,000 of income and property is exempt and creditors can’t get it.

Creditors cannot seize your income or property until they have a court judgment against you.  This means the creditor must first file a lawsuit; then the judge must decide that you money to the creditor.  At this point, the court issues a judgment against you, after which creditors can take your money.

If you don’t contest the lawsuit, and don’t come to court to fight it, the judge may issue against you a “default judgment.”

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.