Freezing of bank account

[BearChaser303]

I am getting ready to file chapter 7 in Colorado. I knew that I should not have any money in any bank account at the same bank where I have a credit account thats included in the bankruptcy. I was informed yesterday however that there is possibility that any bank account could be frozen when I file, even if I do not have any credit accounts at that same bank.

Does anyone have first hand experience with this happening to them? I'm not sure what to do, not thrilled with the idea of getting paper paychecks and living on cash the next few months.

[FreshLikeADaisy]

I have never heard of a bank account being frozen because a person declared bankruptcy, and for that reason alone. But I have heard many stories of people who had delinquent credit accounts with the same institution they did their banking with, and the institution snatched the cash deposits to pay the delinquent credit account, often without prior notice or any warning at all. It's called cross-collateralization. Beyond that, any freezing or seizure or garnishment of bank accounts has to be the result of legal action, like a judgement.

I have to tell you, if I were you, and I had a delinquent account at the same bank I did my checking/saving, I would close that puppy NOW, whether I filed for bankruptcy or not, and either go cash only or open a new account at a completely different bank. Don't wait for them to do it, act now. If you have to get a paper paycheck and cash it in person at the bank it's drawn on, do so -- it's better than having your rent check bounce. Don't leave it open with just a couple dollars in it, either: go ahead and close it entirely. An open account can still be charged fees if someone tries to draw from it, whether they do so with your permission or not.

Good luck!

[BearChaser303]

Hi, Yes I knew about cross-collateralization. I just couldnt imagine a bank account being frozen when I dont have any credit accounts at the same bank.
Thanks for the advice about closing the account and not leaving it open with a couple dollars in it. I had not thought about what you said about it being charged fees.

[FreshLikeADaisy]

Thanks for the advice about closing the account and not leaving it open with a couple dollars in it. I had not thought about what you said about it being charged fees.

Yes, and then you can't close it at all until you pay the fees, so it's a bad loop to get stuck in. Good luck!