Can a bank place a hold a check because of debt owed to federal governemnt? A friend has been uable to cash a large insurance check for over a month and claims that the bank is aware of student loan debt and military bonuses that weren't paid back, so his debts will be repaid from this check before any funds will be made available to him. I am concerned, because I am awaiting repayment of money he owes me, and assumed he would be able to pay me back when this insurance settlement check appeared. Is this scenario feasible?
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When a person owes a debt, especially to the government, the government can freeze that person's bank account and all funds deposited to it will be held for a given time. The government may take all or a part of the funds, depending on the source of the funds and the amount owed. Some retirement accounts and Social Security deposits get preferential treatment. These special treatments may or may not apply to the debt owed the government, but if there is a debt and this check was deposited, it is very possible that the funds are in limbo as the two parties on the debt try to work things out.
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When a person owes a debt, especially to the government, the government can freeze that person's bank 