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Financial Definition of FROZEN ACCOUNT
What It Is
A frozen account refers to a situation where an individual is unable to withdraw money from a bank account due to a court order.
How It Works
A bank account is commonly frozen when the account holder owes money to another party. To freeze a bank account, the creditor must convince a judge that a court order is appropriate due to the facts of the case.
For example, Bob buys a new computer from company XYZ, but defaults on the full payment. Company XYZ hires a lawyer to get a court order to freeze Bob's account for a specific period of time. Bob then receives notice from his bank that the account has been frozen. The notice will usually include the name and telephone number of the lawyer so that Bob can contact the lawyer and try to settle the matter.
Why It Matters
The ability to legally freeze someone's account gives creditors further assurance that they will receive payment for the goods or services purchased by the person who defaults on the payment.
Seen and Heard
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