A bank account may be legally frozen by banks, creditors, and the CRA. It can be frozen due to fraud suspicions or unpaid debts. If your bank account gets frozen, you won’t be able to access your money until the problem is resolved.

In Canada, bank account freeze laws may be used for a number of reasons, most frequently for fraud or unpaid debt. Don’t get too worked up if your account has been frozen. To find out what happened and how to unfreeze your account, get in touch with your bank.

What does freezing a bank account imply?

A frozen bank account prevents the account holder from making any transactions with the account. Even though your account is still active, you cannot access any money.

This implies that you are unable to make withdrawals or transfers, and that any scheduled payments will fail. Any unfinished business will be closed, and any checks you’ve already written won’t be honored. Although you might be able to make deposits, your money will still be frozen.

Canada’s bank account freezing laws

A bank account can be frozen by whom? Three organizations are authorized to freeze your bank accounts under the Bank Act of Canada.

1. Banks: If there is suspicious activity in your account or if you owe money, financial institutions may freeze it without a court order.
2. General creditors: If you are in arrears on your payments and your creditor files a lawsuit and wins, they have the right to freeze your bank account in order to seize the unpaid balance.
3. Canada Revenue Agency: If you owe taxes, the CRA has the authority to freeze your accounts in order to collect them without obtaining a court order.

In certain situations, the federal government may freeze bank accounts with or without using the Canada’s Emergencies Act. These conditions could include allegations of terrorism or economic/financial crime.

Usually, one of two reasons leads to the freezing of bank accounts:

• Suspicious activity. For instance, if it appears that you are the victim of fraud, the financial institution may decide to freeze your account to safeguard your money while the situation is investigated.

• Debt. Both the CRA and your creditors have the authority to freeze your bank account and prevent withdrawals until you come up with a payment plan if you have unpaid debt. If you’re having financial difficulties, it’s best to get assistance and speak with the CRA or other debt collectors to develop a payment plan before your account is frozen.

What happens if you have a frozen bank account?

Your bank might choose not to inform you when your account is frozen. So, if you try to use your debit card or bank account, you might discover the freeze.

Any activity stops when your bank account is frozen by a bank, creditor, or CRA. You are unable to make deposits, withdrawals, or transfers into your accounts. Also, it means that until the problem is resolved, all incoming funds, including paychecks and direct deposits from employers, are frozen.

Additionally, it implies that all pre-authorized debits will also be suspended. As a result, any automatic withdrawals from your bank account for mortgage payments, utility bills, or car payments will not be processed. In the meantime, you’ll have to find another way to pay your bills.

How to unfreeze a frozen bank account

If your bank account is frozen, the first thing you should do is contact your bank to find out why and what you should do to unfreeze it. If you believe you have been a victim of fraud, you should get it investigated as soon as possible.

If your bank account was frozen due to debt, they will provide you with all of the necessary information. This includes the contact details of the creditor who ordered the account to be frozen so you can get in contact with them and arrange a repayment schedule to have the freeze removed.

Conclusion

You do not have to wait until your creditor freezes your account before settling your debt.  Having overwhelming debt is not the end of the world. Our qualified debt experts at EmpireOne Credit Solutions are ready to help you find the best debt solution option available to you. We continue to help Canadians with debt settlement, debt consolidation, consumer proposals and personal bankruptcy. We offer a free consultation. Reach out to us today to get started!