Many debtors are hesitant to make any financial decisions or moves while in the middle of their bankruptcy case, out of fear that the court may accuse them of fraud or other negative claims. This may resonate with you, and at this time, you may be scared to perform an action as innocent as opening a new checking or savings account. For good measure, you should seek advice from your bankruptcy trustee. But also, you may continue reading to learn what it means to open a bankruptcy account at this time and how an experienced Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can offer you similar advice.
Why would I open another bank account when I’m in bankruptcy?
You may feel opening another bank account while you are in bankruptcy is a frivolous action, as you may be dealing with greater, more debilitating financial issues at the time. However, it may often be a strategic, legally sound move, especially if you do so before handing in your initial bankruptcy paperwork. That said, below are some reasons why you would consider this:
- You may simply want another secure, convenient banking location to store your cash on hand.
- You may want to take advantage of the wildcard exemption, which may protect up to $1,000 stored in your bank account(s).
- You may want a new location for your direct deposits to go to, especially if a financial institution may place a freeze on your active account.
- You may want to avoid a financial institution from withdrawing funds directly from your active account, especially if you have outstanding loans here.
Can I open a bank account while in my bankruptcy proceedings?
Simply put, the United States Bankruptcy Code and Kentucky bankruptcy court rules do not explicitly prohibit any debtor from opening another bank account during their bankruptcy proceedings. In doing so, though, you must proceed with caution. That is, you must disclose your old and new accounts alike in your initial bankruptcy paperwork. While opening a new account does not constitute bankruptcy fraud in and of itself, hiding it from your bankruptcy records might be.
It is also worth mentioning that choosing this time to open a new account is not free of potential challenges. A financial institution may be hesitant to accept your application, given your history of overdrawing, outstanding loan balances with your former institution, or the bankruptcy filing itself. Nonetheless, it may be argued that there are potentially fewer obstacles to taking this action after your bankruptcy case closes, because then, at least, you have discharged debts that no longer raise a red flag for future institutions.
Before this gets too much, please seek the guidance and counsel of a skilled Louisville, Kentucky consumer bankruptcy lawyer from Schwartz Bankruptcy Law Center. We will work to the best of our ability to minimize or eliminate this mess from your immediate worry.
