There are things to consider regarding your bank accounts prior to filing bankruptcy.
- Why Do You Suggest That We Move to a New Bank Before Filing?
While there is no requirement that you move to a new bank account prior to filing a bankruptcy case, in many cases the debtor (person filing) owes money to the bank where his/her accounts are located. They may owe a credit card issued by that bank, a car loan, a personal loan, or even an account overdraft protection loan. If that loan is to be included in your bankruptcy case (and all debts must be included), your bank may unilaterally decide that they no longer want you as a client. Thus, you may be forced to get a new bank account anyhow. But, what's worse is that they have the right to apply any money that you have loaned to them (and a deposit into a bank account is really simply a loan to the bank) toward your debt ... even after your bankruptcy case is filed. So, supposing that you owe Chase Bank $5000 for a credit card and you keep your Chase bank account open. If you have your paycheck (lets say $1,500) direct deposited into Chase Bank after your bankruptcy case is filed, Chase is fully within their rights to say "thank you, we are going to apply that $1,500 against the $5,000 you owe on your credit card" even if the credit card was discharged in the bankruptcy case. Then ... oops ... you discover that you suddenly have no money in your account and your in deep &$%@ until you find a new place to have your paycheck direct deposited.
Finally, some banks (such as Wells Fargo) take the position that if there is any money in a bank account when a bankruptcy is filed, the account must be closed until the bankruptcy trustee gives the bank permission to open up the account again. Thus, you won't have the ability to use those funds until that release is granted (often several months later). While the law doesn't require this, if you happen to have a bank with funds in it (this often only applies to larger accounts with more than $200 or $300 in it), you may want to move your funds out of Wells Fargo Bank before you file.
So, our general advice is:
- Never bank at a place where you owe money
- Prior to filing your case, BE SURE that any direct deposits (payroll or other) are going into a bank account at a bank where you own NO money.
- Drain the funds out of any bank accounts where you owe the bank money and open up a new account elsewhere. (See below - Opening Up a New Bank Account). Note that the bank may not let you close the account ... since you owe them money. No sweat ... leave it open and list the bank as a creditor. The bank will eventually close the account after the bankruptcy case is filed.
2. Opening Up a New Bank Account...
When you open up a new account, some of the larger banks will run credit checks, including an inter-bank check for bounced checks and banks who have lost money on you. Remember that until you file your bankruptcy the previous bank probably has not yet lost money on you, but if you have bounced checks in the past you may have trouble getting a new account open. STAY AWAY from the large impersonal banks (ie. the bailout banks ... such as Chase, Bank of America, Wells Fargo and Citibank). A great place to open up a new account is a Credit Union or a local bank. They may be a good friend in the future while you are trying to re-establish credit. But even Credit Unions can be picky about who they take as members. If the major banks won't take you, there are normally a few smaller (less demanding) banks who will open accounts for less creditworthy clients. In the Colorado area, try TCF Bank or Academy Bank (they have outlets in many Walmarts). Be careful though, these "banks of last resort" often have steep service and bounced check fees.
