Legal Definitions - administrative freeze

ADMINISTRATIVE FREEZE

An administrative freeze is when a bank stops a debtor from withdrawing money from their bank account after finding out that the debtor has filed for bankruptcy. This usually happens when the debtor owes money to the bank and still has funds on deposit.

For example, if John owes $500 to Bank A and has $1000 in his account, Bank A may put an administrative freeze on his account after finding out that John has filed for bankruptcy. This means that John cannot withdraw any money from his account until the bank releases the freeze.

Another example is if Jane has a credit card with Bank B and owes $1000. She also has a savings account with Bank B that has $500. If Jane files for bankruptcy, Bank B may put an administrative freeze on her savings account to prevent her from withdrawing any money until the debt is paid off.

An administrative freeze is a way for banks to protect themselves from losing money when a debtor files for bankruptcy. By freezing the account, the bank can ensure that they get paid back any money owed to them before the debtor can withdraw any funds. This can be frustrating for the debtor, but it is a necessary step to ensure that all debts are paid off fairly.