Do banks usually freeze the checking accounts of people who file for bankruptcy??
Our experience with regard to the freezing of bank accounts by banks has been that Wells Fargo Bank will freeze a debtor's bank account upon the filing of a Chapter 7 case and write to the Trustee asking the Trustee if the Trustee wants the money forwarded to him/her. This creates havoc with the Debtor's checking account and takes a considerable amount of time getting sorted out and requires the participation of the Trustee to get it worked out. We have not had the problem in the filing of Chapter 13 cases. I do recall that we have had, one or two instances of Bank of America doing the same thing. However, Wells Fargo has been consistent in their freezing of bank accounts in Chapter 7 cases. If you have a Wells Fargo Bank account and you are going to file a Chapter 7 case, be certain to be aware of this issue prior to filing and take steps to be certain that the effects of the "freeze" on your day to day financial life will be minimal.
It is a violation of the bankruptcy law for a bank to "freeze" an account of yours once a bankruptcy case has been filed. I was told by one national bank who froze a client's account that their policy was to freeze until the bankruptcy trustee stated otherwise. I had to do a little extra work, but the bankruptcy court said the bank violated my client's automatic stay, which is imposed upon the filing of the bankruptcy case.
If you account is frozen due to your bankruptcy filing I would get your attorney to file the motion right away, get it expedited, if possible, and see if you can get some money out of the bank for violating your rights. Good luck.
Wells Fargo and several other banks have been known to freeze accounts upon notification that their clients have filed bankruptcy. Most banks do not abide by this practice but some do. The bank will then send a letter to the bankruptcy trustee and ask for further direction. Unfortunately in Colorado we have seen this happen in both Chapter 7 and 13's, and trustees have used this situation as leverage to get a sweeter settlement from the debtor in certain asset cases, or at best the trustee is non-responsive and won't send a letter of direction until several months after filing. Your attorney could ask the court to issue an order to release the funds, but chances are that it will cost you and your attorney extra $$ to get such an order.
You should hire an experienced and knowledgeable attorney if you wish to file bankruptcy. They should at least be aware of Wells Fargo's common practice along with any other local bank that freezes accounts (there are several other local banks in Colorado that do the same).
No, not at all. In general, you wouldn't be worried about that.
There is something in bankruptcy law called a "set off", in other words if you owe Bank X a $1000 and you also have $1000 in a Bank X checking account, it is possible in theory they can hold those funds initially, even if you file bankruptcy. But it's rare, i don't think I've seen it happen to any of my clients.
In many areas, including Texas, Wells Fargo has a practice of freezing accounts above a threshold, until there is an instruction from the trustee, instructing the bank that the funds may be released.
The trustees will examine this matter at the creditor's meeting, and send a letter to the bank if the property is covered by an exemption
This practice is very distressing to debtors, but the bank claims this privilege under its duty as a custodian of property under Section 543.
Fortunately, this practice does not appear widespread.
Depends on the bank and the amount in the account at the time the case is filed. It is always a good idea to time the filing of a bankruptcy when your account is at its lowest. And no, taking the money out of the account the day before you file is not a smart way to resolve this problem.
Hope this perspective helps!
I do not believe banks should be doing this . While most banks do not there are some that do . They freeze the account and then look to the Trustee appointed for guidance. When this happens to one of my clients I provide the Trustee with proof of what is in the account which amount I would have claimed as exempt in the Petition. I then ask the Trustee to fax a letter to the Lender authorizing the unfreezing of the account . I have not had any issues with getting this done fairly quickly but each case is different and will stand on its own specific facts.
Bankruptcy is a legal way for people or businesses who are no longer capable of paying back their bills to clear these debts and start over.
Chapter 7 bankruptcy is a form of bankruptcy where your debts are canceled, but some of your assets are sold to pay off part of your debt.
Written by attorney Josh Johnson
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