One of the major concerns people have while filing for chapter 7 bankruptcy is whether they can keep their savings and other accounts or not. According to lawyers of Los Angeles based law firm, banks usually do not close the savings or checking account and the amount in those accounts is also protected (up to a certain limit) in most states. However, there are exceptions especially if the money comes from exempt sources like public benefits etc. In case you have a loan with the bank, they may freeze your accounts when you file for bankruptcy.
Some property is exempted when individuals file for bankruptcy and cannot be taken by the trustee to pay your creditors. Every state offers bankruptcy exemptions while some even allow you to choose between state and federal bankruptcy exemptions. If you wish to know whether the money in your checking or saving account is exempted or not, you need to check the exemptions available to you in your state. Keep in mind to check for the following factors:
- Cash on hand – Certain states exempt some amount for this; however, many states do not provide this exemption.
- Child support and alimony – Most states give exemption for child support and alimony.
- Crime victim compensation – Many states exempt the money provided by the government for being a victim of a crime.
- Wrongful death and personal injury payments – Most states exempt money received some time prior to bankruptcydue to wrongful death, personal injury, or other settlement.
- Public benefits – You can keep some portion of public benefits in your bank account by most states. These include Social Security, disability payment and unemployment benefits.
- Salary – Usually, some portion of your current wages in your bank account are exempted and protected in most states.
- Wildcard – Some sates provide wildcard exemption up to a fixed dollar amount which can be used for any property including your bank accounts.
Apart from these there might be other exemptions in your state through which you can protect the amount in your checking or saving accounts.
Listing bank accounts in bankruptcy
While filing for bankruptcy you are required to provide a list of your personal property including cash and money in bank accounts along with their source (child support, Social Security etc.). This helps in determining whether the money is exempt or not as well as the extent to which it is. Similarly, another form requires you to list property which are exempt.
In case there is a loan that you owe to the bank, the organisation might “set off.” In case you default on the loan, bank has the right to cover the loss by taking funds from your saving or checking account. Filing for bankruptcy is considered as a default of loan and thus despite you being current on your payments, the bank might kick in “set off” which are generally not covered in automatic stay. Banks can freeze your account and recover part of the loan when you file for bankruptcy. However, if exemptions are available, you can protect all the money.
In case you have any queries, you can call (888-297-6203) to speak with experienced bankruptcy lawyers.