After Filing for Bankruptcy Can You Keep Your Checking Account?

Written by Aurora F. | Fact checked by The Law Dictionary staff |  

Yes … if the bank holding the account allows it. When a person files for bankruptcy, depending on the type of bankruptcy filed, all loan and credit collections must stop. All bank accounts and assets must be identified by the debtor to a court appointed trustee (chapter 7) or court official / judge (chapter 13) under the penalty of fraud and perjury. A bank account can be frozen, its contents used to pay off debt. The court, and, if applicable, a trustee, and your lawyer will negotiate what is seized, what is exempt, what will be left alone. Federal law dictates much of this. State law can apply itself after Federal law, but cannot supersede or negate federal law. Most contributors of personal scenarios and experience around this situation recommend liquidating all liquid assets and accounts, and, (new terminology) “rat holing” the money. Okay. Dangerous ... Why? One would have to believe in doing this action and having hard cash stashed, that a debtor is likely to speak incorrectly when asked about any available hard cash on hand to be seized, during a court hearing or with the court appointed trustee, likely under oath.

If the bank holding your checking account is also the bank with which you have your car loan, and your home mortgage, and, possibly other loans, even credit cards, and you file for bankruptcy. One would be correct to doubt that the bank is going to continue the checking account, even if the bankruptcy proceedings ignore the account. Banks and financial companies are funny like that. Be an understanding debtor if the bank is a bit grouchy about it.

A few contributors wondered why any debtor would care about keeping a checking account when so many other chaotic activities are occurring. Also, any monies that are deposited into the checking account can usually be seized for payment by the trustee under Chapter 7. There are some exemptions to seizure. This pdf we found online [http://jolleylaw.com/publications/Exemptions%20Federal.pdf] is a very good source / starting place. To finish the point about the checking account, given that it is a target for deposited money, many contributors recommend doing any purchasing by cash and leaving the checking account alone except for those monies that cannot be touched / exempt even if deposited. Get any statements around this in writing. Believe no one’s advice at face value; take no one’s advice unless it is the trustee and your lawyer together. The bankruptcy courts take a very dim view of anyone deliberately misleading or lying to another party during a bankruptcy.

To summarize this article, yes, you can keep your checking account. Yes, the bank and trustee can freeze and take non-exempt monies from it for fees and payments. Yes, you can “drain” your account prior to filing bankruptcy, but be prepared to be questioned about that depending on how soon before the filing for bankruptcy occurred. In all questions and concerns, ask your lawyer and the trustee, and get their answers in writing for your protection. Again, the checking account will likely be the least of your worries.

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