Can A Bank Take Your Savings Account Money After A Bankruptcy Discharge?

By Jay White

June 7, 2015   •   Fact checked by Dumb Little Man

If you file for bankruptcy, your bank should not automatically freeze your savings accounts. The policies on frozen accounts can vary from one bank or credit union to the next. In many situations, it’s not a good idea to deliberately take money out of your savings account to hide it from your creditors. This action counts as bankruptcy fraud and is prosecutable under federal, state and local laws. Hiding savings can also lead to loss of your bankruptcy discharge in many cases.

<strong>When the Banks Can Take Your Savings</strong>

If there’s documented proof that you owe money to your bank or credit union, usually in the form of credit card balances, the financial institution is within its rights to freeze your accounts. They can also take the funds in your savings and apply them to these debts. One possible means of avoiding this situation is to provide the bank proof that your savings are exempt from your bankruptcy. This documentation will normally cause the bank or credit union to allow you access to your savings account again.

<strong>Planning Your Bankruptcy Exemptions</strong>

If you’re able to get your savings included in your list of bankruptcy exemptions, your bank or credit union won’t be able to touch this account. Claiming an excessive number of exemptions in a bankruptcy can be construed as fraud, so it’s highly recommended to consult a knowledgeable bankruptcy attorney. Whether you can get your savings account on your list of exemptions also depends on bankruptcy laws that differ from one state to the next. In many situations, you may need to file a “wildcard” exemption to cover your banks accounts, particularly in cases of chapter 7 bankruptcy. If you find you can’t exempt your savings accounts, you and your attorney can usually work out a limited exemption with the bank and have some of the funds earmarked for you to keep for essential expenses. In some situations, these limited funds can be left in your savings account while the rest of your non-exempted assets are liquidated to pay off your remaining debts after a bankruptcy discharge.

Jay White

I started Dumb Little Man many years ago so great authors, writers and bloggers could share their life "hacks" and tips for success with everyone. I hope you find something you like!

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