When you file for bankruptcy, most lenders will allow you to keep your checking account open (check with your bank). Nevertheless, if you’ll are permitted to save the money in your bank account is a very separate subject. If you file for Chapter 7 bankruptcy, you may be able to preserve the cash in your checking account. Check with Chapter 7 Bankruptcy Attorney Tucson for more information.
What happens to your checking account when you file for Chapter 7 bankruptcy?
If you intend to file for Chapter 7 bankruptcy, you have reason to be concerned about the funds in your bank account. While most Chapter 7 cases go smoothly, abruptly losing bank account cash is a regular source of unnecessary sorrow.
- While pre-bankruptcy preparation might assist, the best approach to prevent problems is to speak with an experienced Tucson Chapter 7 Attorney before filing your Chapter 7 case. Fortunately, you do not lose everything when you file bankruptcy and can preserve all assets protected by your state’s bankruptcy exemption rules.
- If your balance is greater than the value exempted, you must pay the difference. And stating that your recent purchases had not yet cleared will not help.
What to do to avoid this issue:
Make sure you have a little money in your bank account when you apply for Chapter 7 bankruptcy. It would help if you excluded cash, so withdrawing it would not be enough. Instead, spend your money on necessities you are always entitled to, such as food, clothes, utilities, rent, and necessary auto maintenance. Also, maintain your receipts to prove how you spent the money and spend money before filing your bankruptcy petition.
ü The debt could be for past-due fees, or it could be for a loan, mortgage, or credit card.
ü When filing for Chapter 7, be extra cautious if you owe money to your bank or credit union. Banking organizations have the authority to withdraw funds from your account to “set off” (pay) the obligations you owe them.
ü So, if you’ve fallen well behind your payments, as many debtors do before filing for bankruptcy, be aware that your bank or credit union may utilize a set-off to withdraw cash from your account and allocate the amounts to debt repayment.
ü Whereas unexpected setoff is always unpleasant. It’s made worse when utilized to settle a debt that would be discharged in your Chapter 7 cases.
ü Of course, it’s a hardship for debtors who are abruptly locked out of their accounts, and however, the solution is frequently straightforward. Finally, the most appropriate course of action is to consult with an experienced Tucson Chapter 7 Attorney.
Consult a Bankruptcy Attorney:
Nobody wants to lose their property in bankruptcy, but it is possible, especially in Chapter 7. When the trustee wishes to take property without first obtaining permission from the court, Chapter 7 debtors do not even have the right to dismiss the case. As a result, knowing how to safeguard bank accounts in bankruptcy and any other assets before filing your action is critical.
Exemptions for Checking Account Funds:
There is usually no specific exemption for money in a checking account or other types of cash. A few states give a limited cash exemption of a few hundred dollars. This does not preclude you from protecting the money in the account, as it may fall under a different type of exemption. A “wildcard exemption,” for example, may enable you to protect whatever type of personal property up to that value.
ü You may be eligible to claim a specific exemption for that type of cash if it comes from government benefits, such as Social Security benefits, a pension or retirement fund, child or spousal support, or a personal injury lawsuit.
ü Many states also permit a debtor to claim a wage exemption, though it may be restricted to a certain quantity. If the records’ funds are held in tenancy by the entirety, this may also qualify for an exemption in states.
ü You may be able to claim an exemption depending on the source of the funds in your checking account. Finally, the most appropriate course of action is to consult with an experienced Tucson Chapter 7 Attorney.
Checking Accounts Containing Non-Exempt Funds:
If, on the other hand, the funds in your checking account do not qualify for any form of exemption, you must turn them up to the bankruptcy trustee. This will be used to pay off debts. Sometimes just a portion of the money in a checking account is exempt, and the remainder must be turned over to the trustee. A bank may block an individual’s account if they file for Chapter 7 bankruptcy. You can notify the bankruptcy trustee of the freeze and request that the bank lifts the hold.
ü Because the aim of the freeze is to keep assets in the checking account for creditors to recover on obligations, the freeze should be lifted if you can demonstrate that the funds are full o
ü Before filing for bankruptcy, you should ensure that any checks you make from a checking account are cleared.
ü The trustees like Chapter 7 Bankruptcy Attorney Tucson may request that you provide a copy of your bank statement from the day you filed for bankruptcy to the 341 meeting of creditors, which most filers are required to attend.
ü This is since the bankruptcy trustee will verify the account balance on the day of the filing.
ü This indicates that the excess will most certainly be non-exempt and must be paid to creditors.
Conclusion: When you file for bankruptcy, you must file paperwork with the court that identifies everything you possess, including your bank account (the bankruptcy petition and schedules). If you do not list it and the trustee discovers it, you will most probably lose all money in the account, even if you would have been permitted to keep all or part of it otherwise. Ultimately, consulting with an expert Tucson Chapter 7 Attorneys is the best line of action.