Chapter 7 Bankruptcy and Bank Accounts

Chapter 7 Bankruptcy and Your Bank Accounts: What You Need to Know

If you’re thinking about getting out of debt through bankruptcy, you may want to consider how Chapter 7 bankruptcy and bank accounts impact each other.

As a Memphis bankruptcy lawyer, I talk to people every day who are worried about what they’ll be able to keep during the bankruptcy process. Your bank accounts are important, not just for paying bills but also for your day-to-day peace of mind.

So let’s take a look at what really happens to your accounts when you file for Chapter 7.

Can You Keep Your Bank Account in Chapter 7 Bankruptcy?

Generally speaking, you don’t have to close your bank accounts to get out of debt. And in most cases, you can keep everything in your checking and savings accounts in a Chapter 7.

But in some situations, it might depend on how much money is in them when you file.

When you file for Chapter 7, everything you own becomes part of what’s called the “bankruptcy estate.” This includes your bank account balances. But that doesn’t mean the court will automatically take that money. Tennessee law (and federal exemptions, if you qualify to use those) allows you to protect a certain amount of cash and personal property.

But they also want to make sure you pay the creditors back as you’re able. So, if you have a large amount in your accounts, some of it could be taken by the bankruptcy trustee to help pay your creditors.

What If You’re Overdrawn or Owe Money to the Bank?

If your account is already overdrawn or has a very low balance, there’s usually nothing for the trustee to take. You might even want to close that account or switch banks before you file.

Some banks have been known to freeze accounts when they see a bankruptcy filing, especially if you owe them money on a credit card or loan. This is called a right of setoff, and it’s legal in many situations.

To avoid this, it’s a good idea to move your money to a different bank—one where you don’t owe anything—before filing for bankruptcy.

Just make sure to be completely transparent. Don’t hide money or move it under someone else’s name.

And as you have questions about all of these possibilities, make sure to speak honestly and openly with your bankruptcy lawyer. I have decades of experience in this and can help my clients through any complex bank situation, as long as they’re truthful with me.

What Should You Do Before Filing?

Before you file for bankruptcy, you’ll want to speak with a bankruptcy lawyer. We offer a free consultation, so you can know well in advance what to expect and how to navigate your options. If you have questions about Chapter 7 and bank accounts, we can help.

In addition, we might advise you to take some other steps in preparation for filing, like:

• Check your balances and know what’s in each account.
• Move your money, if needed.
• Don’t drain your accounts.

As we always remind clients worried about their bank accounts: you shouldn’t give away or hide your money to avoid listing it in a Chapter 7. That can get you into serious trouble.

Getting Legal Help for Chapter 7 Bankruptcy and Bank Accounts

Your bank accounts are just one piece of the puzzle when it comes to filing Chapter 7. The process can feel overwhelming, but it’s my job to help you understand each step. Together we can protect what’s important and make sure you’re set up for a better financial future.

If you’re worried about how bankruptcy might affect your money, reach out today. I offer free consultations to people in Memphis and the surrounding area who are ready to take back control.

Let’s talk about your options and start building your path to a fresh start.