Filing for bankruptcy can affect many financial aspects of your life, and your bank account could be one of them. You may wonder what happens to the money you have saved or whether you can continue using your account after filing.
Here is what you can expect when you have money in a bank account during the process.
Your bank account remains open
You generally can keep using your checking or savings account after filing for bankruptcy. You can continue receiving your paycheck, paying regular bills and using your money for everyday expenses. Filing does not automatically give the court control over every dollar in your account.
Your account balance gets reviewed
The bankruptcy trustee will review your account information as part of the case. They use this information to determine what property belongs to the bankruptcy estate, which means the money and other property subject to the process. You will need to disclose your accounts and provide the records the court requires.
Exemptions can protect some funds
Louisiana law determines which property and income you can protect when you file. Under Louisiana Revised Statutes Section 13:3881, bankruptcy exemptions generally cover property protected under Louisiana law and certain applicable federal laws. The amount you can protect depends on the type of property and the exemption that applies.
In Chapter 7, the trustee can potentially take the money in the bank or sell nonexempt property to pay creditors. Chapter 13 generally lets you keep your property while you repay some or all of your debts through a court-approved plan.
Your bank may restrict access in some situations
A bank that also holds a debt you owe could sometimes place a hold on money in your account. This situation involves a legal process called a setoff, which allows a creditor in certain circumstances to apply money it owes you toward a debt you owe it.
Understand what happens before you file
Bankruptcy does not automatically mean losing your bank account or all the money in it. Reviewing your account balances, applicable exemptions and your options with an attorney before filing can help you understand how your funds could be treated in your specific case.