Is Your Bank Account Safe During Bankruptcy?

Posted on May 22, 2015 By Ed Woods

Mississippi Attorney Ed WoodsThis is a very legitimate question which is frequently posed by people who consult with me about their debt relief options. I want to provide the best possible advice to those people and to my existing debt relief clients as well. The answer to this question is potentially yes and the effect on your bank accounts is never favorable to you. By this I mean that, in certain circumstances, the financial institution where you have your accounts may be able to take some or all of your money out of those accounts. Often, you are counting on having this money to pay necessary living expenses like utility bills or medication costs. So, here are the things you should carefully consider if you are thinking that you may be filing any type of bankruptcy case in the near future.

The “Set Off”

First, it is usually never a good idea to have deposit accounts like checking and savings accounts or any other deposits of money in any financial institution where you owe money. The problem? It’s called “set-off” and it’s usually buried in the fine print of the documents you execute to open an account or the loan documents executed when you borrow money. It means that when you don’t make your loan payments on time, the financial institution can go into your checking, savings, or other deposit account and get money to pay on your loan. So, if you are contemplating filing a bankruptcy case and you have loans from the same institutions where you have money on deposit, withdraw your money BEFORE you file your bankruptcy case.

Withdraw Before Bankruptcy

Second, if you have money in an account with Wells Fargo, Bank of America, or Chase, withdraw it BEFORE filing your bankruptcy case. You should take this action even if you don’t owe any money to any of these financial institutions. Failing to do so may result in your loss of access to these funds for months.

Finally, a credit union is not your friend if you will be filing a bankruptcy case in the near future. If you have money in a credit union account, withdraw it BEFORE you file your bankruptcy case.

If you think you may need to file a bankruptcy case, please make sure you promptly consult with a reputable debt relief attorney who preferably has many years experience in the bankruptcy courts in your area. A thorough analysis of your personal situation is necessary to determine if filing a bankruptcy case is the best option for you and, if so, how it will affect you in the short and long terms. Our attorneys offer a free, initial consultation to discuss your situation and your options. Only after a complete review of your personal situation can you make an intelligent decision about whether filing for bankruptcy is right for you.