People often ask what happens to their bank accounts once they file for bankruptcy. The answer depends on whether or not your bank is also your creditor. Your bank is your creditor when you owe the bank money, whether it be for overdraft protection, credit cards, personal loans, etc.
If you do not owe your bank money then your bankruptcy should no effect whatsoever on your bank account. You should be able to maintain your relationship with your bank.
If you do owe your bank money, things become a little more complicated. First, the bank will close down any open credit accounts you have with them. Also, the bank may attempt to set-off your bank account against the debt you owe (for example-take money from your checking account to pay your credit card debt). However, banks usually do not do this.
Second, the bank may choose to freeze your bank account in order to see if they can ask the bankruptcy court to off-set your account. This rarely happens. In California, Wells Fargo is known to do this if you have a significant balance of money in your account.
Last, your bank may choose to close down your bank account is they take a loss to your account. This is often done by credit unions. When this happens, your bank will give you around 90 days notice that they are closing your banking account.
To avoid any of these situations, it is best to open up a bank account with a bank you do not owe money to prior to filing for bankruptcy. If you do this and close down your old bank account, make sure you disclose the closed account in your Statement of Financial Affairs #11.
If you have any questions about bankruptcy contact an Orange County Bankruptcy Attorney at
1st California Law today!