Do the automatic stay provisions of the Bankruptcy Code protect money I have in the bank, or is it seized by the court?
Money in the bank may or may not be taken by the trustee, depending on the bankruptcy exemptions claimed. Your exemptions may be either federal or state. Ordinarily, the trustee is the only party that can seize your account once you have filed your bankruptcy case with the court; however, there is one important exception. If you have an account in a bank, credit union, savings and loan or other financial institution to which you also owe money, that institution may refuse to release account funds to you once you have filed bankruptcy. This right of set-off is most commonly used by Credit Unions where you may be a member. This is a very important, and often overlooked aspect that must be considered prior to filing. By the way, there is nothing that prevents a debtor from simply closing an account before he or she files a bankruptcy case.
Money in the bank may or may not be taken by the trustee, depending on the bankruptcy exemptions claimed. Your exemptions may be either federal or state (see above). Most ordinary debtor’s bank accounts should be exempted, but you must consult your attorney about this issue. Ordinarily, the trustee is the only party that can seize your account once you have filed your bankruptcy case with the court; however, there is one important exception. If you have an account in a bank, credit union, savings and loan or other financial institution to whom you also owe money, that institution may refuse to release account funds to you once you have filed bankruptcy. This is a very important, and often overlooked aspect that must be considered prior to filing. By the way, there is nothing that prevents a debtor from simply closing an account before he or she files a bankruptcy case.
