A common question when it comes to filing for bankruptcy is whether or not you will lose all the money you have in your bank account. The short answer is that it depends on the type of bank accounts you have and what bankruptcy exemptions may apply.
For instance, a 401(k) and many other retirement accounts and pensions are protected in bankruptcy. In fact, in Chapter 13 bankruptcy debtors generally get to keep their property, which includes money in bank accounts.
Filing Chapter 7 Bankruptcy
But in Chapter 7 bankruptcy the outcome is not always the same. Take a checking or savings account for example. If you hope to keep money in either, it will depend on your state’s bankruptcy exemptions or the federal ones. In general, exemptions exist for the following:
- Cash on hand – a few states exempt a small amount of “cash on hand” while most do not exempt any amounts
- Public benefits – benefits like Social Security, unemployment benefits or disability payments may be exempt if you have received them and they have accumulated in your bank account
- Wages – most states will exempt a fraction of your recent wages and it will be protected if it is in your bank account
- Child support and alimony – a good amount of states have exemptions for child support and alimony money
- Crime victim compensation – if you receive money from the government because you were the victim of a crime, then you can take comfort knowing many states exempt that money
What if the Bank Freezes Your Account?
In rare situations, your bank may end up freezing your checking, savings, or other deposit accounts after you file for bankruptcy. They might do this because they are trying to protect an asset (your money) that is part of the bankruptcy estate and under the bankruptcy court’s jurisdiction or because they are protecting their right to offset your money against any debt you owe the bank.
If the bank ends up freezing your accounts to protect an asset of your bankruptcy estate, it is not of their choosing whether your money is exempt. In this scenario, the bank waits until the trustee releases the asset or tells the bank to turn over the funds to the trustee.
In the event your bank freezes your account to protect their right to offset the money you owe them, then you should know that is completely within their right. While restrictions exist as to when and how your bank can exercise its right to take out money you owe them, they will usually only take money out if you have defaulted on your obligation. Sometimes, banks will freeze your account to protect your funds while they determine if they will exercise their right to offset.
Expert NJ Bankruptcy Attorneys Can Assist You
There is definitely a lot that goes into filing for bankruptcy, especially when trying to figure out what is exempt and what is not. In order to keep what you are lawfully allowed to keep, you should contact an experienced bankruptcy attorney, like the ones at the Law Office of Joel R. Spivack.
Mr. Spivack will make sure to use his abundant knowledge of New Jersey bankruptcy laws and language to make sure everything you are able to keep safe is protected. There is no reason for you to lose everything when many state and federal exemptions exist to keep a decent amount of your property protected.
If you are considering bankruptcy in New Jersey then you should contact the Law Office of Joel R. Spivack at 856-488-1200 to schedule a free, in-person initial consultation today.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.