This is the rule of setoff.
That rule, states that any asset/funds in the creditors control can be used to satisfy the debt owed. This is a sticky situation.
Depending on what the creditor does, it is possibly a violation of the automatic stay. However, the lender can freeze the account, since the asset secured by the amounts owed. Ultimately, you may lose the money, as it is not feasible to pay the creditor fair market value of the asset held, here the money, so you might lose the money.
One major case on point states :
Citizens Bank of Maryland v. Strumpf, 116 S.Ct. 286 (1995)
Administrative hold is not a setoff, i.e., no violation of stay
Therefore, by freezing the account, the creditor may not be in violation of the automatic stay.
Some guidance can be found on the USTrustee site, which says:
Q. Setoff And The Automatic Stay. Setoffs found to violate the automatic stay do not justify denial of an otherwise valid right of setoff. Instead, violations of the stay are punished under § 362(h), which does not authorize denial of setoff as a sanction. At best the debtor should be entitled to damages suffered on account of the stay violation which should be zero unless the debtor was willing and able to provide adequate protection for the creditor's security interest in the amounts held subject to setoff. 11 U.S.C. §§ 506(a), 363(a),(c)(2), and (e); see generally In re Hudson, 168 B.R. 449, 453 (Bankr. S.D. Ga. 1994) (court finds IRS
withholding is a violation of the stay but permits setoff nonetheless; violation of stay only entitles debtor to recovery under § 362(h)); In re Midway Indus. Contractors, Inc., 167 B.R. 139, 144 (Bankr. N.D. Ill. 1994) (offset in violation of the stay is not "sufficient reason to deny the [IRS] the modification of the stay" -- court sanctions IRS under ??(h) instead), rev'd, 178 B.R. 734 (N.D. Ill. 1995) (IRS adjustments are not setoff; § 362(h) does not apply to corporate
debtors); In re Lough, 163 B.R. 586, 589 (Bankr. D. Idaho 1994) (??(h) does not allow for sanctions for freezing funds even if a technical violation of the automatic stay); In re Custom Ctr., Inc., 163 B.R. 309, 318-19 (Bankr. E.D. Tenn. 1994) (withholding funds, even if a violation of the automatic stay, does not justify denial of otherwise valid right of setoff); In re Gribben, 158 B.R. 920 (S.D.N.Y. 1993) (setoff without relief from stay a mere "faux pas" and does not justify denial of an otherwise valid right of setoff). But see In re Operation Open City, Inc., 148 B.R. 184 (Bankr. S.D.N.Y. 1992), aff'd 170 B.R. 818, 825 (S.D.N.Y. 1994) (setoff in violation of stay is void and warrants turnover order against creditor).