In most cases, you can keep your bank account open and continue using it after you file for bankruptcy. The money in your account on the day you file becomes part of your bankruptcy case, but California exemptions often protect some or all of it. Problems usually arise only when you have a large balance, owe money to the same bank, or move funds around before filing. Law Offices of Terrence Fantauzzi helps clients plan ahead so their bank accounts are handled correctly from the start.
Is the Money in My Bank Account Part of My Bankruptcy Case?
Yes. When you file, everything you own, including the balance in your checking and savings accounts, becomes part of what is called the bankruptcy estate. You must list every account in your petition, and the trustee will usually ask for recent bank statements.
What matters most is the balance on the date you file, not the balance a week earlier or later. Money you earn after filing generally belongs to you in a Chapter 7 case.
Can I Keep the Money in My Account?
Often, yes. California offers bankruptcy exemptions that protect certain property from creditors and the trustee. Depending on which set of exemptions you use, you may be able to protect:
- Funds traceable to Social Security and certain other public benefits
- A portion of recent wages deposited into your account
- Cash covered by a general “wildcard” exemption
- Money in protected retirement accounts, which are separate from your bank accounts
If your balance is within the exemption limits, you keep the money. If it is above them, the trustee in a Chapter 7 case may collect the unprotected portion for your creditors. Choosing the right exemption system is one of the most important decisions in your case.
What Happens in Chapter 7 vs. Chapter 13?
In Chapter 7 bankruptcy, the trustee reviews your accounts as of the filing date. Exempt money stays with you. Any non-exempt amount may be turned over to the trustee, though careful timing often prevents this.
In Chapter 13, you keep all of your property, including your bank accounts. However, the value of any non-exempt funds can affect how much your unsecured creditors must receive through your repayment plan.
Can My Bank Freeze My Account?
Sometimes. If you owe money to the bank where you have your account, such as a credit card, personal loan, or overdraft, the bank may have a right to “set off” what you owe using funds in your account. Banks may also place a temporary hold on an account after learning of a bankruptcy filing.
To avoid this, many people open a new account at a bank or credit union where they do not owe any money before filing. Your attorney can help you decide whether this step makes sense for you.
Will Bankruptcy Stop a Bank Levy?
Yes. Once you file, the automatic stay stops creditors from levying your bank account. If a creditor has recently taken money through a levy, it may be possible to recover some of those funds through your bankruptcy case, depending on timing and the amount involved. Acting quickly matters when a levy is pending.
What About Joint Accounts?
If you share a bank account with a spouse, parent, or someone else, you must still list it. The trustee may look at who contributed the money in the account. Funds belonging to the other account holder are generally not part of your case, but you may need records to show whose money is whose.
What Should I Avoid Doing With My Bank Account Before Filing?
Moving money the wrong way before filing can create serious problems. Before you file, avoid:
- Transferring large amounts to family or friends
- Paying back relatives or favored creditors in large amounts
- Emptying accounts without being able to explain where the money went
- Hiding or leaving out any account from your paperwork
The trustee will review your recent transactions. Transfers that look unfair to creditors can be undone, and leaving out accounts can put your discharge at risk.
How Can I Protect My Bank Account When Filing?
A few practical steps can help:
- Time your filing around paydays so your balance is lower
- Pay necessary living expenses, like rent and utilities, before filing
- Keep paystubs and benefit records to show where deposits came from
- Consider opening an account at a bank where you have no debt
Our bankruptcy attorney team can review your accounts and recent activity to help you file at the right time.
Talk to a Bankruptcy Attorney About Your Bank Accounts
Worrying about losing access to your money should not stop you from getting debt relief. With the right planning, most people keep their accounts and the funds they need to live.
To learn how bankruptcy would affect your bank accounts, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 today.
