How Can I Protect My Bank Accounts in Bankruptcy?

You may be devastated with the unfortunate reality that many of your hard-earned assets and property may be taken away following your bankruptcy filing. But you may feel ashamed knowing that you may also be stripped of the little funds you have left saved in your bank accounts. With that being said, please follow along to find out how to protect your bank accounts during bankruptcy and how a seasoned Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you in these efforts.

How will the funds be taken out of my accounts at this time?

Your bank accounts may generally be left untouched if you pursue Chapter 13 bankruptcy. This is because you may be trusted to continue to manage your finances as usual and overall use the funds saved in these accounts to make your monthly payments for your mandatory repayment plan.

However, your Chapter 7 bankruptcy may come with a different story. This is because, for one, your appointed bankruptcy trustee may seize these funds to pay your outstanding creditors on your behalf. Secondly, you may owe money to the bank where you hold your accounts. In this case, the bank may exercise its set-off rights and use your funds to cover your outstanding debts.

How can I protect the funds in my bank accounts during bankruptcy?

For many reasons, it is pivotal that you claim certain bankruptcy exemptions when you file your petition. These exemptions may protect your assets and property, up to a certain value, from being taken in your proceedings. So, in the state of Kentucky, the funds within your retirement accounts (i.e., IRAs and 401(k)s) are exempt, regardless of the amount you have saved. The same may apply to your life insurance plans and public benefits. Then, there is also the wildcard exemption, which allows you to protect up to $1,000 worth of your personal property. Namely, this may include your cash on hand and funds saved within your bank accounts.

Going back to the scenario in which you owe money to the bank where you hold your accounts, you may want to open new bank accounts elsewhere before submitting your bankruptcy paperwork. Importantly, though, you must still keep your existing accounts open and report them in your bankruptcy case so it does not appear as if you are attempting to hide your assets.

One last piece of advice is that you should use your funds to pay off your necessary bills before filing. This may include grocery shopping, gas for your vehicle, utility payments, and more. This is so you may ensure that all these expenses are covered before your trustee inevitably takes a large sum of your bank account funds. To reiterate, you should only spend your remaining money on essential things and not anything that may be deemed as luxurious or excessive.

To give yourself enough time to develop a solid case, please be sure to get in touch with a talented Louisville, Kentucky consumer bankruptcy lawyer from Schwartz Bankruptcy Law Center as soon as possible. We look forward to hearing from you.