Getting ready to file chapter 13

[pete42]

I'm getting ready to file chapter 13 and read some of the post regarding credit unions and them freezing accounts. I have my one car financed through my credit union. The payments are up to date but I'm wondering if I file and they get notice, they will freeze my checking and savings account. I have about $3k in my savings (tax refund) and $2500 in my checking. I also have my paycheck direct deposit to my checking account. That could really screw me up if thats true. anyone?

[BKDefender]

Yes they can and will do it. The first thing I tell my clients to do is to open a bank account with a bank that they do not owe any money to, withdraw from their current bank and put everything in the new bank accounts.
Just don't open accounts with Wells Fargo or Chase - they freeze accounts with a balance on the date of BK filing.

William

[pete42]

Even if my car payments are up to date?

[BKDefender]

Pete - sorry about that, I missed the 'I am current' part. If you are current on your payments then I don't suspect they will do it. If you plan to reaffirm the debt on the car then you should be fine. Only worry about it if you plan to surrender it.

William

[tigergem]

Personally, I wouldn't take a chance. I would open other accounts as a safeguard. Especially for your direct deposit. And put a chunk of cash on a pre-paid debit card.

[Flamingo]

If you are getting ready to file I am assuming you have your own attorney. Ask him/her directly since it involves a credit union. We personally had no issues as to our regular bank account but the bank did close the line of credit (zero balance) attached to it for overdraft purposes. Credit Unions are iffy during BK and I would also be on the safe side, check with your attorney and if necessary, open an account elsewhere.

[parkd]

Credit unions in general or just ones that you owe money to? I have a CU for my checking and savings but I don't owe them any money. If I ever have to claim BK due to short selling my house and wells fargo coming after me for the deficiency are you telling me my CU who is not affiliated with wells fargo will freeze my checking account?

[SMinGA]

parkd, I think the general concern is CUs or banks where you have debt. And some banks (as mentioned above BKdefender) are known to freeze accounts even if you don't have debt accounts with them.

[NoTomatoCan]

This is such a dirty practice!

I have had a no fee checking and savings with BOA for many years. Never did any other loans with them. 5-6 months ago, BOA completed the Countrywide integration, where I happen to have a loan for a rental I am letting go.

Well, a week ago I notice a $20 monthly fee on my statement! When I called BOA they stated that they would gladly waive the $20 monthly fee if I "attached" my old countrywide loan to my checking and savings accounts! Told me how this would make managing my accounts so much "easier"!!!

I can only imagine how many unsuspecting people fall for this, only to see their checking and savings account wiped out due to cross collateralization!

[Lissy]

And some banks (as mentioned above BKdefender) are known to freeze accounts even if you don't have debt accounts with them.

How can they do this? Doesn't that violate the automatic stay? Why would my bank, if I don't owe them any money, even be notified of my BK? My atty never mentioned this to me and I bank with Wachovia, which is part of Wells Fargo, so I'm a little concerned. I filed 2 weeks ago and I didn't have much of a balance on the day of filing. Maybe $10 or something like that. I do now though, due to a bonus from work and my paychecks are direct deposited. I haven't touched the bonus, as I'm not sure if I'm going to get to keep it. And my first trustee payment is due end of next week. If they froze my account, I wouldn't be able to make that payment. How does that help anyone?

[tigergem]

How can they do this? Doesn't that violate the automatic stay? Why would my bank, if I don't owe them any money, even be notified of my BK?

My bank was notified by BNC and they were also not listed as a creditor. They didn't freeze my accounts or anything, but I guess I just got lucky, because I had never even considered such a thing happening. (Hadn't read that far on the forums.) If they subscribe to BNC they might even find out that your filing was accepted before you do, unless you file pro se.

[Lissy]

Well, I filed 2+ weeks ago and I've already received docs from the court. So has my mom, since she is a co-signor on one of my loans. I guess the bank would know by now and would have acted if they were going to. Still makes me wonder if I should withdraw everything. I just don't want that to look fraudulent to the trustee. I can't see how this is legal. If I can't pay the trustee (not me specifically, just anyone) because the bank froze my account, I can't imagine that would go over very well.

[SMinGA]

I thought it would be an automatic stay violation also - but its something about right of setoff, if I got the term correct. Kind of an insurance to make sure you don't create any after-filing debts with them I suppose?

[Lissy]

I did a quick Google search and found this. It only mentions Chapter 7 though, not 13.

"Within the past couple of years, a couple of banks have started freezing the funds in the deposit accounts of debtors when they file a Chapter 7 bankruptcy case. To my knowledge, the only two banks that are doing this are Wells Fargo Bank and Union Bank. They do this regardless of whether they are owed money by the debtors.

Why can these banks freeze the funds in their accounts? Well, it’s a rather complicated legal analysis, but here is the basic explanation:

When a Chapter 7 bankruptcy case is filed, EVERYTHING the debtor owns or has an interest in becomes property of the Chapter 7 Trustee. That includes everything from your house to your underwear to money in your bank accounts. The Trustee has a duty to liquidate any assets that are not protected by an exemption.

What Wells Fargo and Union Bank are supposedly doing is protecting (acting as a custodian for) the money that is in their bank accounts on the day the bankruptcy case is filed for the benefit of the Trustee until the Trustee decides to either take the money and pay it out to the creditors (if it’s not exempt) or, more likely, “abandon” (return) the funds back to the debtor. This only applies to the exact funds in the account on the date the bankruptcy case is filed. It does not apply to funds deposited subsequently, but obviously this can be a major inconvenience if there’s a large amount in the bank account that gets frozen. It can take anywhere from several days to several weeks to get the Trustee to authorize the banks to “unfreeze” the accounts, and sometimes it even requires a motion to be filed with the court to have the Judge order it. If the funds are exempt, they will eventually be released, but those banks will freeze the funds."

Taken from here: http://bklaw.com/bankruptcy-blog/200...counts-freeze/

[pete42]

Thanks for all the input. I spoke to my attorney today and he agreed that I should stop my direct deposit to my checking accnt at our credit union because of the car loan. He said cu's have been known to freeze accounts even if the loan is up to date. Fortunately I belong to another credit union and do not have any loans with them. Problem solved thanks.