Friday, July 3, 2015

Why would I do that? ... change banks before filing for bankruptcy

Today, most people have their pay deposited directly into their bank accounts and it takes time to change their direct deposit. So people balk on the occasions when I suggest they move their banking before filing for bankruptcy. My recommendations are generally based more on conversations with other attorneys and experience than the law.

First, I have talked to several attorneys who's clients have had accounts locked by a national bank. The bank has taken the position the accounts belong to the trustee until the trustee releases the accounts. The general consensus is the practice is against bankruptcy law but it seems to happen.

If clients have a credit card with the bank that also holds their accounts, I really encourage them to move banks. I am always concerned that the bank will claim a security interest in the funds on deposit.  It hasn't happened yet but I have that concern. Also, the bank may have a right to take payments (set-off) from your accounts as you are preparing to file bankruptcy but before you can file. That is even harder to get back if not impossible.
Image courtesy of Vichaya Kiatying-Angsulee  

Then there is the risk of garnishing an account. That is when a judgment creditor has the sheriff seize money in a debtor's account. I've had clients who came to me days before their next paycheck and we found that an account was going to be garnished. We filed their bankruptcy the day before their paycheck was deposited into the account and saved the money but it took a week or two to get the money released.

This week I ran into a new twist with a credit union. The credit union has a software program that automatically shuts down the member's electronic access and debit cards to their accounts after they miss so many payments. For a short time, my client thought all access was lost. It took some time but we got the account opened up but not without some angst.

Most of these problems probably violate bankruptcy law but may not rise to the level a court would want to handle. The freezes on accounts, for my clients, has been relatively short. However, they are long enough to hassle debtors who are living from paycheck to paycheck.  So moving accounts can give clients some control over the inconvenience.

For those reasons, I may recommend clients change bank and establish accounts into smaller banks where they have no credit.

If you want assistance, legal representation, or just want to know more about Mark Medvesky or Medvesky Law Office, LLC, check out our website at

#bankruptcy #Chapter_7 #Chapter_13 #Montgomery_County #law_firm #Bucks_County #Pennsylvania

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