Filing for bankruptcy protection can be a very stressful experience. If you are preparing to file, you most likely have heard various horror stories about the process. A common concern is whether a person can have a bank account frozen. Your Bryan bankruptcy lawyer will be able to give you a more definitive answer for your own circumstances, but the answer in general is “possibly.”
Which Type of Bankruptcy You Are Filing Is a Factor
If you are filing Chapter 13, it is very unlikely you will see your bank account frozen. Chapter 13 is a restructuring of debt, and you will agree to terms under which you will pay back some of your debt for a period of 3-5 years. However, if you are filing Chapter 7, you are seeking a total liquidation bankruptcy, and in this case there is a chance your account will be frozen. In essence, when you file Chapter 7 you are laying out all of your assets before the bankruptcy court, and the court will determine which assets you can keep.
Exemptions are rules under which a person may keep certain assets. While all of your assets will be scrutinized by the Chapter 7 bankruptcy court, you need to be left with essential resources to eat, pay rent, and have basic transportation to your job. You may, then, be allowed to keep a certain minimal amount of money in your bank account without having it frozen.
Protecting Your Bank Account
There are certain situations under which it is very likely you will have your bank account frozen, at least temporarily. One of these is if you owe money to the bank where your money is kept. Generally under this circumstance it does not matter whether your account funds are covered under a bankruptcy exemption. The best way to handle such a situation is to move your money to a different bank prior to filing bankruptcy.
Often a person is authorized as a user on a bank account that belongs to another. For instance, you may have aging parents who wish for you to have immediate access to their money in case of an emergency. If you are such an authorized user, it is essential that you request a letter from the trustee to the bank which states that you are not the owner of the funds in that account. This may take a considerable amount of time. As an alternative, you might simply ask your parents to remove you as an authorized user.
While other smaller banks may hold similar views, Wells Fargo will freeze your bank account, even if you do not owe it money. They claim that they have a special obligation to protect assets in a bankruptcy case. If you have a Wells Fargo account, you may wish to close it or move the money prior to filing.
Finally, if your money is frozen by a bank, you will need to obtain a letter from the bankruptcy trustee asking that the account be unfrozen. This can take a considerable length of time.
If You Have Questions or Would Like Assistance with Your Bankruptcy
Bankruptcy is very complex, and since 2005 the rules for filing have changed considerably. It is important that you work with a Bryan bankruptcy lawyer. Call Peterson Law Group at 979-703-7014 or 936-337-4681 today.