Unfreezing Bank Accounts After a Judgment

After a judgment has been entered against a party, that individual or company may have their bank accounts frozen.  This is typically done so that funds can be preserved to satisfy a judgment, and a frozen bank account cannot be unfrozen unless the creditor agrees to unfreeze the funds or other action is taken.  Although it can be extremely frustrating to have money in a bank account frozen, unfreezing bank accounts after a judgment is possible in many circumstances.

Restraining Notices

The first thing that should be mentioned about unfreezing bank accounts after a judgment is how bank accounts get frozen in the first place.  After a judgment has been entered, the attorney for a creditor may prepare restraining notices and serve them on banks.  The restraining notices essentially state that a judgment has been entered against an account holder, and that funds associated with the debtor need to be frozen so that they can be used to satisfy a judgment.  Sometimes, creditors know where debtors have assets and will use targeted restraining notices to those institutions.  However, more often, creditors send restraining notices to numerous banks in the hopes of serving a bank that has assets for a debtor.

Vacating the Judgment

Perhaps the most powerful strategy of unfreezing bank accounts after a judgment is to try and vacate or eliminate the judgment itself.  This will also eliminate any restraining notices and orders that were issued along with the judgment.  If the judgment was entered by default, meaning that the defendant did not participate in the proceedings, the judgment may be vacated if the defendant has a reasonable excuse for not answering and a solid defense in the case.

Oftentimes, judgments are actually confessions of judgment, meaning that they are agreed-to judgments that have been executed by the parties and may be fled if the defendant does not perform an act as promised.  These are called confessions of judgment, and they are more difficult to vacate.  Oftentimes, people can vacate confessions of judgment because people did not follow the specific requirements of such documents when executing or filing them.  Other times, confessions of judgment can be vacated on the basis of mistake, fraud, or some other defense.  Vacating a judgment is oftentimes a complicated matter, so if you would like to pursue this strategy, it pays to speak with an experienced commercial lawyer.

Settlement with the Creditor

One of the most effective ways of unfreezing bank accounts after a judgment is to come to an agreement with a creditor.  Oftentimes, it is more difficult for creditors to take money out of bank accounts than it is to simply freeze the money in bank accounts.  As a result, creditors will often agree to accept a lump sum of money right away to satisfy a debt and then accept money over a period of time.  This of course also benefits the debtor, since it is usually easier to pay money over time rather than all at once.

However, many details need to be hammered out when unfreezing bank accounts after a judgment through a settlement agreement.  For instance, creditors sometimes require interest payments in addition to the principal balance being paid off through a payment plan.  In addition, creditors often ask that debtors waive their right to contest a judgment as part of agreeing to a payment plan.

If a creditor and debtor agree to a payment plan, they usually need to execute two documents.  One is the settlement agreement itself, which spells out the terms and conditions of the settlement negotiated between the parties.  Also, the parties usually need to execute a conditional release.  This authorizes the bank to release the negotiated lump sum amount of money to the creditor and then unfreeze the rest of the funds held by the bank.  Furthermore, creditors should also agree that they will take acts to unfreeze all other bank accounts maintained by a debtor, and will take no other actions to restrain funds of the debtor.

Protected Funds

Sometimes, unfreezing bank accounts after a judgment is as easy as telling the bank that the funds in the account are protected from garnishment or restraining orders.  For instance, some government entitlements, such as a certain amount of social security benefits are protected under the law.  In addition, some states have taken steps to protect funds that have been awarded pursuant to government relief initiatives, such as the payroll protection plan.  In addition, sometimes if bank accounts have low amounts of money, they are also free from bank freezes or garnishment.  The reasoning behind this protection is that people need to have access to a limited amount of money to live, and freezing bank accounts with small sums of money could impose substantial hardships on parties.  Different states have varying protections for many types of funds, so it pays to speak with a lawyer in your jurisdiction who can explain the types of funds that may be exempt from bank freezes or garnishments.

The Rothman Law Firm has substantial experience unfreezing bank accounts after a judgment for both companies and individuals.  We know how to move fast to ensure parties get access to their money as soon as possible.  If you are looking for an experienced New York and New Jersey commercial lawyer to help with your bank account freeze or other legal issue, please feel free to contact The Rothman Law Firm to request a free legal consultation.