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After Bankruptcy: Can Bank Accounts Be Frozen?

Within the past couple of years, certain banks have started freezing the funds in the deposit accounts of debtors (http://www.bklaw.com/bankruptcy_terms.html#debtor) when they file a Chapter 7 bankruptcy case. To my knowledge, at least in California, the only two banks that are doing this are Wells Fargo Bank and Union Bank. They may do this even if no money is owed to them.

This has resulted in a great deal of confusion among clients, as well as novice bankruptcy attorneys who often fail to advise their clients of this possibility. The freeze usually lasts until the Trustee in the case authorizes release of the funds, and how long that takes can depends on the Trustee and, possibly, their relationship with the debtor's attorney.

Obviously the best way to avoid this problem is to simply not leave a large amount of funds in these bank accounts on the date the bankruptcy case is filed. Once the case is filed, funds can be deposited into the account without issue.

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