Question about having to empty bank account

[Ann]

Could someone please tell me why we must empty our bank accounts prior to filing? All my bills are paid online through internet banking. Why must we empty our accounts? How do they come after a certain amount of money you have in there? What if you withdraw it and then redeposit it after the day you file? Am I way off here? Please inform me! Thanks

[DeadManCrawling]

The idea is not to empty it at the last moment. It is to spend it down on reasonable expenses.

This only applies if ou have a large amount in the account (think several thousand or tens of thousands), or if you cannot exempt the money under your state laws.

Also, to make things difficult, some banks, like Wells Fargo, will freeze funds when you file if you are over a certain number. But not always. Ridiculous, but true.

Even more complicated, bank setoffs combined with secured versus unsecured and cross-collateralization agreements encourage most folks to not have much money in the bank on filing day.

Spend it slowly on things you usually pay for, necessities, or draw out cash to get below say a mark of 500 or so.

Any money you cannot exempt is on record through bank statements and can be seized by the trustee if you don't have a way to exempt it.

That is the short explanation. If someone else wants to post the 300 page LONG version, please do so.

[mickeyme]

I would not take the chance. I was banking with WAMU (now Chase) and since I had two WAMU cards included in my BK they were able to freeze my last account. Thankfully I only had less then $100 so it did not really matter.
Not worth the chance of losing your funds and then having to run around looking for a new bank...do it before you file if possible. Good luck...

[JKPDX]

My attorney advised me to get my bank account down to $5 or less on filing day, as you need to provide a bank statement as of the end of business on day of filing. I had $2.64 on filing day.

Regarding the OP question about paying monthly expenses, I double paid all my utilities, cell phone, etc. so I have no bills but my house payment this month.

[music12]

you can also just "go cash" and for a few months pay everything by money orders. a bit of a hassle (and expense - could be $1 per money order) but i think worth it. i would trust nobody with my money during the process because you just never know what might happen, and some creditors or banks can seize your money illegally, so why risk it. cash might be a risk from theft, but if you haven't been robbed so far, it's unlikely anybody would rob you while filing bk.

[EbbTide]

I closed my BoA account because I was including my BoA Visa in my filing.

Opened a new account with a regional bank without any problems... and I just continued paying regular bills like normal.

It's cross-collateralization amongst accounts in one lending institution which can become a real problem.

[mtbc]

Your cash at the time that you file -- that you have and that you're due -- becomes part of your bankruptcy estate and, except for what you can exempt, is up for the trustee to give to your creditors. If the exemptions you're taking do allow you to exempt enough of your cash, I'm told they don't mind you using it for necessary normal expenses until you get the official word that they agree it's exempt and you can indeed keep it and dispose of it as you like.

Personally I don't plan to do much different because I don't owe my bank money on a credit card or anything and I'm taking Federal exemptions and don't have real property so I have plenty of room to exempt any cash I'll plausibly have. I figure not doing things much differently to usual will help reassure the trustee I'm not trying to hide anything. Perhaps I'm unusual in having the comfort of that wiggle room though. In the worst case, if the bank do freeze the funds, I can easily borrow from friends.