Trying to Fix
Junior Member
California
Sorry this may get long...I feel the need to provide some background. My husband and I recently started a business together. We have invested for a few years in real estate using personal funds and have decided that starting an LLC for this purpose would, for many reasons probably obvious to this audience, be a smarter way to go. So, we have our LLC, set up so that we are both joint owners, and we started a business bank account with the bank we both have had personal accounts with for years (a credit union, not sure if that makes a difference.) We've had our account maybe 2 weeks. We both had to provide our SSN's and various other personal info, as well as the tax ID and operating agreement for the LLC, to open the account. At the time, they opened the account, no problems or questions. I think we had to put something like a few hundred dollars in to open the account. About a week later, we transferred in $30,000 from a personal account to begin putting toward business expenses. The next day, the account gets frozen with no explanation. First clue is we can't log in online. We call the number and have to leave a message to be returned within 48 hours (!). This from a bank we chose because on the consumer side they can be called 24/7 from anywhere in the world and reach a human being. But for their business customers apparently they think it's just fine to have all your business funds frozen and essentially you are out of business for TWO DAYS. So I get a call back today. The woman tells me that the account is frozen because I had a vehicle loan balance charged off 4 years ago. Now yes, this was a younger, poorer, and dumber time in my life. Basically I was out of the country working for 6 months. The truck was basically a lemon but I had put enough into it that I kept thinking it was worth continuing to try and fix. I really had no protection under lemon law as I bought it as is from a used car dealer. Well I decided my 6 month hiatus would be a good time to turn the truck over to someone to fix without having to worry about being without a vehicle. So I did, I turned it over to a "friend of a friend", who WAS a licensed mechanic and had recently been laid off from a large dealership which specialized in the make of my truck. (This was at the beginning of the economy going downhill and layoffs were everywhere.) I thought, "Perfect, I can help out someone who needs it with some work, get my truck fixed by someone who knows this kind of truck. Win win". Not so much. Long story slightly shorter, this guy dismantled my truck and parted it out. He essentially stole it piece by piece, then disappeared. I got no recourse from law enforcement because he left the state and the truck couldn't be recovered since it was in pieces scattered across wherever, and insurance wouldn't pay out without a police investigation. I owed about $3500 on the truck, which I kept paying for about 6 months after it became apparent I was getting no truck and no recourse. Then I lost my job. Of course I'd had to buy another vehicle, and I simply couldn't afford to make a monthly payment on something I didn't have, so I stopped it. Probably not the best choice but I was in survival mode. It has since been charged off, something I knew because I had pulled my credit report once I started making money again in order to clean up any discrepancies (fortunately not many).
Fast forward to now. They have frozen our business account, essentially stopping our work (and means of providing for ourselves), because of an old charge-off of a personal debt. I offered to pay the debt in full, but they said since it has been charged off there's no way they can do that. They initially offered two options:
1) They would close the account and return the funds to my husband's personal account. I initially said no to this as it would mess up our bookkeeping and taxes. I should have said yes.
2) They would continue to freeze the account pending receipt of an amendment to our LLC removing me from ownership. Not removing me from the account, mind you, removing me from ownership of my own company THAT I STARTED. This would take a minimum of two weeks as it would need to be filed with the state. On principle I don't want to do this at all, but if it were something that could have unfrozen our account on the spot I'd have taken the hit and just figured a way to fix it down the road. But we can't wait two weeks, so it's a moot point. We have contractors who are waiting to be paid, who have already purchased materials and performed work.
After about 20 minutes of back-and-forth on the phone, I finally said "Ok, transfer the funds to my husband's personal account, at least it will give us a means of doing business until we figure this mess out. We can sort the bookkeeping and records later". Well, then all of a sudden they had to "check with higher authority" to make sure they could do that. I was promised an answer by close of business today, which I did not get.
At one point, the woman stated the account "shouldn't have been opened". Ok...but you opened it. If a retail store offering a credit card or a car dealership can run credit on the spot and give an answer, surely you had ample opportunity to search your OWN BANK's records and say "sorry we can't open this account". But, you didn't. A WEEK later, after having plenty of time to investigate, you happily accepted our $30,000 deposit. NOW, all of a sudden, you say the account should never have been opened. I wish I had that statement recorded, because if the account should never have been opened, then your only real answer is to close it and return the money. You have blankly stated that I don't owe you any money, since I offered to pay any money owed and you said there was nothing owed since it was charged off. If I don't owe you money then what are you holding my money for? And, even if I did owe you money, how is it legal for you to hold my COMPANY's, not MY money, hostage? If you simply think I'm a bad risk and don't want my business, that's OK too. Kindly return my company's money and we will take it elsewhere.
So, I guess my question is...can they do this? Can they hold a company's funds over an old debt of one of the owners? I always thought only the IRS or state could freeze business assets over personal debt and vice versa. Especially when they really aren't freezing it over a "debt", since there is no longer a debt, but over a bad risk? And, let's call this what it is...it's not a "freeze", it's a "seize", however temporary. It's putting my business interests and livelihood in jeopardy.
Please advise. We are in limbo. I don't feel like this can possibly be legal. I think this business accounts manager at the local branch is trying to cover her you-know-what with higher because she should never have opened the account, according to their policy. We can't do business, and our guys aren't going to get paid. I want to call a lawyer but figured I'd check for opinions here first.
Thanks.
Sorry this may get long...I feel the need to provide some background. My husband and I recently started a business together. We have invested for a few years in real estate using personal funds and have decided that starting an LLC for this purpose would, for many reasons probably obvious to this audience, be a smarter way to go. So, we have our LLC, set up so that we are both joint owners, and we started a business bank account with the bank we both have had personal accounts with for years (a credit union, not sure if that makes a difference.) We've had our account maybe 2 weeks. We both had to provide our SSN's and various other personal info, as well as the tax ID and operating agreement for the LLC, to open the account. At the time, they opened the account, no problems or questions. I think we had to put something like a few hundred dollars in to open the account. About a week later, we transferred in $30,000 from a personal account to begin putting toward business expenses. The next day, the account gets frozen with no explanation. First clue is we can't log in online. We call the number and have to leave a message to be returned within 48 hours (!). This from a bank we chose because on the consumer side they can be called 24/7 from anywhere in the world and reach a human being. But for their business customers apparently they think it's just fine to have all your business funds frozen and essentially you are out of business for TWO DAYS. So I get a call back today. The woman tells me that the account is frozen because I had a vehicle loan balance charged off 4 years ago. Now yes, this was a younger, poorer, and dumber time in my life. Basically I was out of the country working for 6 months. The truck was basically a lemon but I had put enough into it that I kept thinking it was worth continuing to try and fix. I really had no protection under lemon law as I bought it as is from a used car dealer. Well I decided my 6 month hiatus would be a good time to turn the truck over to someone to fix without having to worry about being without a vehicle. So I did, I turned it over to a "friend of a friend", who WAS a licensed mechanic and had recently been laid off from a large dealership which specialized in the make of my truck. (This was at the beginning of the economy going downhill and layoffs were everywhere.) I thought, "Perfect, I can help out someone who needs it with some work, get my truck fixed by someone who knows this kind of truck. Win win". Not so much. Long story slightly shorter, this guy dismantled my truck and parted it out. He essentially stole it piece by piece, then disappeared. I got no recourse from law enforcement because he left the state and the truck couldn't be recovered since it was in pieces scattered across wherever, and insurance wouldn't pay out without a police investigation. I owed about $3500 on the truck, which I kept paying for about 6 months after it became apparent I was getting no truck and no recourse. Then I lost my job. Of course I'd had to buy another vehicle, and I simply couldn't afford to make a monthly payment on something I didn't have, so I stopped it. Probably not the best choice but I was in survival mode. It has since been charged off, something I knew because I had pulled my credit report once I started making money again in order to clean up any discrepancies (fortunately not many).
Fast forward to now. They have frozen our business account, essentially stopping our work (and means of providing for ourselves), because of an old charge-off of a personal debt. I offered to pay the debt in full, but they said since it has been charged off there's no way they can do that. They initially offered two options:
1) They would close the account and return the funds to my husband's personal account. I initially said no to this as it would mess up our bookkeeping and taxes. I should have said yes.
2) They would continue to freeze the account pending receipt of an amendment to our LLC removing me from ownership. Not removing me from the account, mind you, removing me from ownership of my own company THAT I STARTED. This would take a minimum of two weeks as it would need to be filed with the state. On principle I don't want to do this at all, but if it were something that could have unfrozen our account on the spot I'd have taken the hit and just figured a way to fix it down the road. But we can't wait two weeks, so it's a moot point. We have contractors who are waiting to be paid, who have already purchased materials and performed work.
After about 20 minutes of back-and-forth on the phone, I finally said "Ok, transfer the funds to my husband's personal account, at least it will give us a means of doing business until we figure this mess out. We can sort the bookkeeping and records later". Well, then all of a sudden they had to "check with higher authority" to make sure they could do that. I was promised an answer by close of business today, which I did not get.
At one point, the woman stated the account "shouldn't have been opened". Ok...but you opened it. If a retail store offering a credit card or a car dealership can run credit on the spot and give an answer, surely you had ample opportunity to search your OWN BANK's records and say "sorry we can't open this account". But, you didn't. A WEEK later, after having plenty of time to investigate, you happily accepted our $30,000 deposit. NOW, all of a sudden, you say the account should never have been opened. I wish I had that statement recorded, because if the account should never have been opened, then your only real answer is to close it and return the money. You have blankly stated that I don't owe you any money, since I offered to pay any money owed and you said there was nothing owed since it was charged off. If I don't owe you money then what are you holding my money for? And, even if I did owe you money, how is it legal for you to hold my COMPANY's, not MY money, hostage? If you simply think I'm a bad risk and don't want my business, that's OK too. Kindly return my company's money and we will take it elsewhere.
So, I guess my question is...can they do this? Can they hold a company's funds over an old debt of one of the owners? I always thought only the IRS or state could freeze business assets over personal debt and vice versa. Especially when they really aren't freezing it over a "debt", since there is no longer a debt, but over a bad risk? And, let's call this what it is...it's not a "freeze", it's a "seize", however temporary. It's putting my business interests and livelihood in jeopardy.
Please advise. We are in limbo. I don't feel like this can possibly be legal. I think this business accounts manager at the local branch is trying to cover her you-know-what with higher because she should never have opened the account, according to their policy. We can't do business, and our guys aren't going to get paid. I want to call a lawyer but figured I'd check for opinions here first.
Thanks.
