Bankruptcy and Your Bank Accounts

Part of filing for bankruptcy is listing all of your assets on the petition.  Most people have checking and savings accounts and want to know if they are protected once they file.

At least part of your personal property is exempt under the Bankruptcy Code, see https://www.middlesexcountybankruptcyattorney.com/2013/11/

For debtors who do not own a home, the wildcard exemption is $13,125.00.  To the extent that a homeowner seeks to protect a bank account, the exemption is $1,225.00 plus up to $11,850.00 in any unused residency exemption.  If a homeowner does not have equity in the home, the full exemption should be available.

However, if you have a delinquent account with your bank, such as a credit card or a loan, the bank may have the right under the terms of your agreement with it to freeze your account and offset the amount owed to it against the funds in your account.  It is therefore important to consider closing out any such account before filing your bankruptcy petition and opening a new account at a bank that does not have the right of offset.

Another situation that occurs is when a judgment creditor levies against your bank account prior to you filing for bankruptcy.  In order for the creditor to obtain the levied funds, it must file a turnover motion with the court.  They would result in the entry of an Order requiring the bank to turn over the levied funds to the creditor.   So if the bankruptcy is filed before a turnover Order is entered by the court, then the debtor can keep the levied funds.  If on the other hand, the Order is issued before the bankruptcy is filed, the creditor gets the money.

You should consult with an experienced bankruptcy attorney to protect your bank accounts before filing. Contact me today to schedule a consultation to learn more about the bankruptcy process.

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Charles D. Whelan III has been committed to excellence for over 30 years. With offices located centrally in New Jersey, he is able to provide businesses and individuals with excellent legal services.

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