Spouse Access to Frozen Accounts.

In normal circumstances, joint account holders generally may withdraw funds from their joint accounts without obtaining each other’s permission. However, having a joint account opens the possibility that the account can be frozen to satisfy one account holder’s nonexempt debt.

Should a Couple Keep Their Money in a Joint Account or Separate Accounts?

If a husband and wife have separate bank accounts, each of which is registered in the husband’s and wife’s names separately, one spouse’s separate account can generally avoid being subjected to the other spouse’s debt collection action. With that said, joint accounts also have their own benefits; not only do they simplify financial transactions between couples, but they also give each spouse independent withdrawal authority. So, when one spouse’s permission is required in order to withdraw funds from a joint account, it must generally be due to some unusual contract clause that overrides the standard permissions associated with joint accounts.

Will a Bank Grant a Joint-Account Spouse Access to Frozen Funds?

While normally a joint account gives each spouse independent withdrawal authority, when a bank receives a freeze order for a joint account, it will generally abide by that order. Even when the spouse who doesn’t owe the debt claims ownership of the frozen funds, the bank is typically required to hold the funds until it is specifically authorized to release them.

If a Joint-Account Spouse Wants to Regain Access to the Frozen Funds, What Must He or She Do?

Once a bank receives a freeze order, it will generally not release any of the funds in the account until it is specifically authorized to do so. Therefore, if a joint-account spouse wants to regain access to the account, he or she must promptly pursue one of the following procedures:

• Request an exemption for a percentage of the frozen funds;
• Argue that the legal basis for the freeze is insufficient to justify the government’s retention of the account’s funds;
• File a formal objection to the freeze with the district court or other authority that issued the freeze; or,
• File a motion for the return of the account’s funds, if necessary.

How do ownership records and a power of attorney change what the spouse may claim?

Does a Power of Attorney (POA) Give a Spouse Direct Ownership of the Debtor Spouse’s Frozen Funds?

While a power of attorney may authorize one spouse to access and manage the other’s accounts, this authorization does not automatically grant the agent ownership of the account or ownership of any money that may be subject to a freeze. An account may remain in one person’s name while another person deposits funds or, if authorized through a power of attorney or other arrangement, helps manage the account; ownership and withdrawal authority are separate questions. However, if you have a power of attorney for your spouse’s accounts, you should speak with our attorneys about whether you have a direct legal right to any of the frozen funds in the account.

How Do Divorce Proceedings Affect Which Funds the Non-Debtor Spouse May Claim?

During divorce proceedings, the court typically determines which funds are subject to division as marital property and which are separate property. In some cases, this involves tracing deposits made in the account before, during, and after the marriage in order to identify the owner of the account’s current funds. If your spouse’s frozen account is subject to a divorce proceeding, it may be possible for the court to determine your ownership interest in the account.

How Does the Government Search for Your Spouse’s Hidden Marital Assets?

The government can identify any hidden marital assets in several different ways. These include using subpoenas for documentary records, obtaining access to financial and communication records, and employing investigators trained in financial tracing and analysis. The government’s investigators will examine all of these records to find evidence of marital assets that your spouse may be attempting to hide from the court.

Can Documentary Records Establish a Money Trail for Your Spouse’s Frozen Accounts?

Documentary records can be used to establish a money trail across domestic and foreign financial transactions. With that said, the records you have may not be complete on their own; so, in order to establish your right to access frozen funds, it will be necessary to examine all available documentary records to construct an accurate timeline of your spouse’s financial transactions.

Which Kind of Freeze Is Blocking the Account, and What Deadline Controls the Challenge?

A Private Creditor’s Challenge

Generally speaking, a private creditor needs a court judgment before garnishing a debtor’s bank account or other assets. Once it obtains a judgment, the judgment creditor may request a writ of garnishment directed to the bank.

Upon receiving the writ, the bank will commonly freeze all of the customer’s assets, including those in joint accounts, before sending out a notice to the account holder. The customer’s assets will then remain frozen until the customer or a joint-account holder takes action to object to the freeze. As with the other scenarios discussed above, the next steps depend on whether the account owner is married to the judgment creditor.

The Government’s Forfeiture Procedure

The government’s forfeiture procedures are somewhat similar to those of private judgment creditors. The government can use forfeiture laws to target property subject to forfeiture, including:

• Personal assets (cash and other personal property);
• Business assets (real property and business accounts);
• Investment assets;
• Retirement assets; and,
• Cryptocurrency assets.

The government can seek a restraining order to freeze any of these assets both before and after indicting a suspect. If the government seeks a pre-indictment restraining order under 21 U.S.C. § 853(e), the applicable standard depends on the type of order: after notice and a hearing, the court must find a substantial probability that the United States will prevail on forfeiture, that failure to enter the order will make the property unavailable for forfeiture, and that preserving the property outweighs the hardship to the affected party; for an ex parte temporary restraining order, the court may enter the order if the United States demonstrates probable cause to believe that the property would be subject to forfeiture and that notice would jeopardize the property’s availability. In order to prove probable cause that assets are subject to forfeiture, the government may also need to provide evidence that the target is “connected to an ongoing criminal enterprise.”

The Civil Asset Forfeiture Reform Act (CAFRA)

The Civil Asset Forfeiture Reform Act (CAFRA) establishes certain procedural safeguards for individuals who have had their assets seized administratively by the government. While these procedural safeguards include the right to contest the government’s authority to seize assets, the applicable deadlines for filing these contests are very short. If the government’s seizure of your assets under CAFRA is causing issues for you and your spouse, you must quickly discuss the legal grounds available for challenging the freeze with your attorneys.

Todd Spodek represented the juror at the centre of the challenge to the Ghislaine Maxwell verdict.

Which Deposits May Remain Protected Despite the Account Freeze?

Which Deposits are Protected from All Ordinary Creditors?

As a general rule, deposits made from Social Security, Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), or other benefits (like veterans benefits) should be exempt from collection by ordinary creditors. This does not mean that every dollar deposited from those sources is automatically protected from garnishment; federal law generally automatically protects up to two months of qualifying benefits deposited electronically, while additional amounts and exceptions may require further analysis.

Which Deposits May Receive Collection Exemptions?

In addition to the deposits and benefits that are protected from all ordinary creditors, certain other deposits and benefits may receive protection from ordinary creditors as well. These include (but are not limited to):

• Deposits made from Temporary Assistance for Needy Families (TANF);
• Unemployment benefits, disability payments, and similar state-funded assistance;
• Child support, alimony, and spousal support payments; and,
• Life insurance benefits.

Are Any Exempt Deposits Subject to Garnishment or Other Form of Debt Collection?

Yes, even exempt deposits can be subject to garnishment or other forms of debt collection under certain circumstances. For example, exempt deposits are subject to:

• Some exempt benefits, including Social Security and SSDI, may be garnished for court-ordered child or spousal support, but SSI benefits generally remain protected;
• Unpaid taxes and other debts specified in federal law (such as student loans); and,
• Other specified debts.

What Happens if I Co-mingle Exempt and Nonexempt Deposits in One Bank Account?

If you co-mingle exempt and nonexempt deposits in one bank account, the nonexempt deposits may leave the account (and the exempt deposits) vulnerable to debt collection. With that said, a frozen account that contains exempt deposits might still be partially protected even if some other deposits in the account are nonexempt.

What Happens if I Use a Bank Account to Hold a Debt for Which I am Responsible?

When an account is frozen and it contains exempt deposits, the next step is to determine whether the funds will remain protected when the account owner makes a protected-property claim against the freeze. If you believe your spouse’s account has been frozen wrongfully, make sure to reach out to the experienced attorneys at Spodek Law Group today to learn more about your options.

What records and counsel communications help challenge a spouse’s frozen account?

What Financial Transactions May Be Rejected After an Account is Frozen?

If you have a joint account with your spouse and that account is frozen, you can still write checks and use automatic debits, but the bank will likely return those checks and the recipient will likely not receive the payment. So, while you may be able to write a check from your joint account, a check you write will likely be returned uncleared, and automatic debits initiated from the account will also be returned.

How Do Frozen-Account Fee Charges Affect the Account’s Balance?

If a bank returns a check from a frozen account or rejects an automatic debit, the bank will likely charge the account holder for the rejected transaction. The bank may charge “insufficient funds fees,” overdraft fees, or other similar fees for these rejected transactions. These fees will further reduce the balance of the account, and in the case of an account that was previously already overdrawn, can make the account even more heavily overdrawn.

Which Financial Records and Communication Records Should I Preserve in order to Dispute a Frozen Account?

If you are looking to dispute a spouse’s frozen account, there are several types of financial records and communications records that can assist your attorneys. We strongly suggest that you preserve any relevant records you have in your possession, including:

• Documents demonstrating ownership of the account and authorization for withdrawals;
• Invoices, checks, deposits, and other documents that show where deposits came from and what funds were used for;
• Records showing deposits made with income, wages, and other nonexempt sources of funds;
• Wire transfer records;
• Emails, contracts, and other communication records relevant to the account’s transactions;
• Evidence of attempts to get funds released by the bank or other relevant parties;
• Evidence showing that the account was frozen or that you were notified of the frozen account; and,
• Evidence that the account was used to support dependent family members.

What Information Do I Need to Discuss with My Spouse and Counsel Before Speaking with the Bank or Investigators?

If you think the bank froze your spouse’s account wrongfully, don’t speak with the bank or the government’s investigators or agents before speaking with your legal counsel first. Your legal counsel will be able to advise you regarding what information to provide and how to communicate with these individuals. However, speaking with your spouse before speaking with your legal counsel, about either financial or communication records that your attorneys may need, is highly recommended.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 888 348 8028 to speak with our team.