What becomes of your bank account during bankruptcy?

[lotsahats]

What will become of my checking account? Will I still be able to use it for regular, necessary transactions, like buying groceries, or paying rent? Or will it be (for lack of a better word) seized?

I know I keep flooding this forum with question after question, but I post them as they enter my mind. I always search the forum before posting, though.

I really appreciate everybody's help!

[drowning123]

Not a problem lots. That's what we're here for. I was in your shoes this time last year. I filed on August 20, 2010. Withdraw all your money and close your bank account about 1 day before you file. After you file, open a new bank account. When do you plan on filing?

[LadyInTheRed]

Not a problem lots. That's what we're here for. I was in your shoes this time last year. I filed on August 20, 2010. Withdraw all your money and close your bank account about 1 day before you file. After you file, open a new bank account.

That's pretty conservative advice. It won't hurt to take the advice as long as you list the cash you withdraw as an asset on your BK petition.

Wells Fargo is known for freezing accounts when people file bankruptcy and waiting for instructions from the trustee. But, that is illegal and they have been slapped for it. I haven't read about them freezing an account lately, but if you have a WF account, you might want to close it just to be sure. If you owe money to the bank where your account is located, and the bank is not a federally chartered bank, closing the account before filing is a good idea. There is no reason you can't open a new account at a different bank before you file. Other than that, you can keep the account open and keep using the account after you file. Just be sure to claim the balance on the date of filing as an asset and apply whatever exemptions you can to it. If you don't have exemptions to cover the entire balance, you should try to spend the cash on living expenses before filing. If you can't exempt the entire account and file a chap 7, you will have to pay the non-exempt portion to the trustee. If you file a chap 13, your plan will have to pay at least the non-exempt amount to your unsecured creditors.

[discouraged]

What I did was to take all money out of the bank I was with since I was filing they were included as I had a cc with them, open a new account with a local bank and keep most of my money under my mattress, so to speak. Actually, I had it hidden all over my house, which constantly worried me - ie: what if there was a fire, etc.

Just before my bk was filed, I opened a new account with another neighborhood bank, since the bank I'd previously chosen was Wells Fargo (not a good idea as you've read) and now keep most of the money in savings and transfer as needed for expenses.

[lillymarlene]

For what it's worth, I opened one business checking account before I filed chap 13 last year. Then, also a personal checking account, in the bank that held my mortgage, survived. Of two other accounts: one was closed by the bank, and the other I no longer use since, I had to include a line of credit I had with that bank in my bk.

[Freddy03]

I haven't done anything with both my bank accts. One is a credit union that I had no other business with just a checking account and the other is just a regular checking acct. I have been using them as usual since I filed.

[Pandora]

Wanted to add that we were advised not to file until all of our bills were cleared out of our account. Reason being is because as LITR stated, you must declare the amount in your account both when you file, then again before / at your 341 (our trustee required bank statements as of the day before our 341).

We were told that even if we had checks written on the account, if bank balance showed $1500 due to not clearing yet but the register balance was $700 - we would have to declare the banks balance vs. ours.

[Freddy03]

Wanted to add that we were advised not to file until all of our bills were cleared out of our account. Reason being is because as LITR stated, you must declare the amount in your account both when you file, then again before / at your 341 (our trustee required bank statements as of the day before our 341).

We were told that even if we had checks written on the account, if bank balance showed $1500 due to not clearing yet but the register balance was $700 - we would have to declare the banks balance vs. ours.

YIKES! I filed on the day I was paid but I have been withdrawing all deposits for months b/c of bank levy threat. I withdrew the rest of the money owed to my attorney on the day I filed. I wonder if that's gonna be an issue.

[IamOld]

YIKES! I filed on the day I was paid but I have been withdrawing all deposits for months b/c of bank levy threat. I withdrew the rest of the money owed to my attorney on the day I filed. I wonder if that's gonna be an issue.

I don't think so - you took the $$ out paid it to atty - so IF anyone asks, you/atty shows receipt of funds!

[jeep75]

Unless you have a credit card or car loan with the same bank as your checking/savings accounts there is really no need to do anything in regards to emptying them and closing them. The advice to do this only comes into play when you have loans or credit cards with the same bank as they can take your money to pay the debts you stopped paying.

[Pandora]

YIKES! I filed on the day I was paid but I have been withdrawing all deposits for months b/c of bank levy threat. I withdrew the rest of the money owed to my attorney on the day I filed. I wonder if that's gonna be an issue.

I dont know Freddy, I dont believe it would be an issue, however better to be safe and ask your attorney how the trustee works in that regard. Our trustee required bank statements for the previous 6 months before filing, then another the day before 341. We had to provide our lawyer with bank statements up until we were confirmed.

[drowning123]

Absolutely not an issue, Freddy. I did the same thing. I withdrew $1600 (in $400 increments) to pay my attorney on the day I filed.

[JackBondLove]

I had about $50 in my accounts (I had like 8 accounts, with one being an account that had a minimum of $25, which since I was in default on the associated line of credit, I could not liquidate!) My trustee just made me pay the total. After the discharge, I simply closed all the accounts and got checks for the proceeds. Ironically, I had opened up an account at Wells Fargo (since I was to rollover my 401K into an IRA there after the BK filing) before the filing, and had about $2 in it on the date of the filing - it did not get frozen.

As for paying the attorney, I simply withdrew the $1500 and got a cashier's check to pay him. I also had to get some work done on the house - for maintenance, not home improvement (about $2600 total) and I officially paid the contractors with again a cashier's check, or a debit (which I had to make sure was done before the filing date, even though the crew would not be coming by to do the work until after the filing!) Once the attorney announced the date, I withdrew all but $1 from my main checking account the day before.

On the day after my filing, I sent in the form to distribute my $5K Roth IRA, which took about 2 weeks before I was able to walk into my local bank and walk out with cash from that. My mother gave me a few hundred bucks to tie me over. The week after filing, I applied for Food Stamps (since it was only then that I was truly broke!) and got them going about 2 weeks later as well. (I had no unemployment coming in at that time.)

[DirkDiggler]

What about a Credit Union where we have a car loan that is current and we plan to do a ride thru on? Should we move our $$ elsewhere for the time being? We also have overdraft LOC on our checking but its current and only at a $100-200 balance usually....

[fileda13]

I had a joint checking account with my wife, and I was depositing my self-employed business checks into it. I opened two DIP business accounts (I have 2 self-employed business names) to deposit my self employment income into, and take distributions out and transfer to the joint account. I am still using the joint account for paying bills (my attorney said this was fine).