It is natural to wonder what will happen to your checking account if you file for a Chapter 7 Bankruptcy. As a bankruptcy law firm, we help our clients by protecting their assets as much as possible. We even protect what is in their checking account by claiming those funds as part of the allowable exemptions. We can explain this entire process in greater detail during a consultation.
No matter what, all bank accounts must be listed in the schedule of assets at the time of the bankruptcy filing. Trying to hide a checking account is unwise and could lead to the loss of those funds. It is far better to disclose and follow the appropriate legal process. To learn more about specific options, schedule a consultation. In the meantime, here are the basic rules surrounding checking accounts and what you should know.
You are allowed a certain number of exemptions
When the petitioner files for bankruptcy, they are allowed to keep a certain number of exemptions. However, some property will be exempt from the bankruptcy and cannot be seized by the trustee to pay creditors. The need to determine which assets should be kept and which ones should be let go of if a petitioner exceeds the threshold is a complicated issue. This is why it is best to discuss the exemption issue in person with an attorney.
Partially exempt accounts
It is also possible for funds in a bank account to be only partially exempt. For example, half of the balance may be exempt due to set limits while the other half may need be paid to the trustee. In this case, a check will need to be written to them.
Which bank makes a difference
One challenge that may present itself is if a petitioner has debit and checking accounts with the same bank. For example, if a petitioner has a $10,000 credit card with the bank and is trying to eliminate that debt through a Chapter 7 Bankruptcy, there is always a chance that the bank may seize the funds in the checking account in order to help pay for that debt. Additionally, some banks will use money in accounts to secure other loans so if that money has been collateralized, the chances of recovering it are slim. Still, banks must follow the law and as an attorney, it is our job to ensure that they abide by the trustee’s rulings in addition to state and federal law concerning bank account funds and the bankruptcy process.
The other thing to note is that each bank has set policies in regards to what happens when a customer files for bankruptcy. If their policy states that accounts will be closed upon a bankruptcy filing, the money may be returned but the account may no longer be available for use.
A joint checking account is more complicated when one person on the account is filing for bankruptcy but the other is not. Due to the complexity of this and the various rules that must be applied, it is wise to speak with an attorney to discover the best way to handle this particular situation.
Call for help
Learn more about the bankruptcy process and what exemptions you can claim by calling our law firm and scheduling a consultation.
NOTE: This is for informational purposes only and does not constitute legal advice.