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If you’re behind on your bills and in debt over your head, you may be considering filing a chapter 7 bankruptcy. But before you file, it’s important that you take some steps to protect the assets you will need to see you through the bankruptcy process. I’m not encouraging you to conceal cash assets from your Trustee – you need to disclose it all. But this discussion today is about protecting it from creditors that would normally not have access to your money in the bank during a bankruptcy.
How Banks Differ From Other Creditors In a Bankruptcy
Like most people, you probably have money in a checking accounts and if you’re lucky, you’ve got a little tucked away in a savings account. Most people considering a chapter 7 don’t have a lot of money – maybe a few hundred – maybe a few thousand dollars and can’t afford to lose it when it’s money you need to pay your legal fees or to live on. But if you also have debts owed to the bank where your money is, it will be treated differently from other creditors because of the potential for a cash offset.
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What Is a Bank’s Right to Offset Assets for Debt?
If you have a credit card issued through your bank that you are planning on including in your chapter 7 and also have money sitting in checking or savings at that bank, as soon as you file you could trigger an offset. I don’t like the idea of someone taking money out of my account without my consent and I doubt you will either. The bank will usually freeze and then seize the funds and apply them to your debt and any remaining balance will become part of the debts written off in your chapter 7 bankruptcy.
How Can You Protect Your Bank Accounts from Bank Offset?
First, if you don’t have any debt associated with your banks (mortgage, car loan, personal loans or credit cards) it shouldn’t be an issue. But I always say “Better safe than sorry.” To protect yourself, open up a new bank account with a bank or credit union where you have no debt association and move your money before you file. This is not hiding assets from the Trustee – it’s simply moving them out of reach of your bank so they can’t offset it and you can get the full benefits of chapter 7 protection.
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Is Moving Your Money Breaking Any Rules or Laws?
As long as you don’t try to hide your money in someone else’s name or lie about it to the Trustee, you are okay. If you have $1,000 in Bank A (where you also have a credit card that will be wrapped up in your chapter 7) and you move it to Bank B and you disclose on your bankruptcy schedules and to your Trustee that you have $1,000 cash in the bank, you’re not breaking any rules or laws. Just be sure to open your new bank account and move your cash prior to filing chapter 7.
If you have questions about your bank accounts, cash or other assets and how much of them you will be able to keep in a bankruptcy filing, we can answer your questions. Contact the law offices of John T Orcutt for North Carolina bankruptcy help you can trust. We have offices conveniently located in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington to meet all of your needs. Call us today for an immediate free consultation on getting the debt relief you deserve!