Bank accounts with money are assets and must be listed in your bankruptcy petition. If you have a balance in your account on the day of filing, you must list the balance and use an exemption to protect the funds.

It is important to know that some banks routinely freeze all accounts after a person files for bankruptcy. This can cause outstanding checks to bounce, automatic payments to lapse, and for your debit card to be denied when trying to stock up on groceries.

A Bank’s Right of Setoff

Depending on the terms of the agreement you signed when you opened the account, the bank may have a right of setoff. A right of setoff means that the bank can offset a debt owed to the bank against the debtor’s bank account balance. This is essentially the right to take money out of your account to pay your debts owed to the bank, based upon your consent when opening the account.

With the potential for bank freezes or offsets, what are the options to avoid these disasters?

Bank Where You Do Not Owe Money

The easiest way to avoid potential banking problems during bankruptcy is to avoid banking where you owe money. Open a new account at a bank where you do not owe money. Ensure the account balance is zero on the day you file.

If you have direct deposit set up through your employer, it is important to switch the payment to the new account before filing for bankruptcy. Also, remember to update any automatic payments that draft from your previous bank account.

It is not uncommon for clients to express an attachment to their current checking and savings accounts. Often these accounts are many years or decades old. While we understand your affinity for a bank you have been with so long, it is important to focus on the benefits of bankruptcy and the strategy that will help to avoid financial losses.

A Fresh Financial Start

The biggest benefit bankruptcy can give you is a fresh financial start. Opening a new bank account is a way to recognize your fresh start. It will not have any ties to the debt problems of your past.

We’re committed to helping people get out of debt and gain the financial freedom they deserve. We invite you to learn more about who we are here. If you live in Savannah, GA or the surrounding areas and have questions about your debt relief options, let’s meet for a free consultation. Please reach out to us at (912) 351-9000 or contact us by filling out this simple web form.


We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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