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SETOFFS AND WHY THE BANK WON'T GIVE YOU YOUR MONEY

When I meet with clients to prepare for their bankruptcy filing, one of the questions I ask is whether they have a bank account with a financial institution they owe money. If they do, I advise them to move their money to another bank. When you deposit money, you are loaning money to the bank. It may not seem like a loan, because the bank promises to return this money to you when you ask for it, but it is in fact a loan. In situations where you also owe the bank money, a “mutual obligation" exists, meaning both you and the bank have a duty to repay and a right to be repaid. If you default on your loan, they will take money from your bank account. This is referred to as a “setoff." If you get behind on your payments, the first thing you should do is move your money to a financial institution you don’t owe money. If your bank freezes your bank account, then you should consider discussing your financial situation with a bankruptcy attorney.

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