Chapter 7 Trustees and Your Bank Account | Free Consult (2024)

FAQs

Do they freeze your bank account when you file Chapter 7? ›

Do they freeze your bank account when you file Chapter 7? Generally, no. Especially if the full amount in the account is protected by an exemption. Some banks (most notably, Wells Fargo) have an internal policy of freezing bank accounts with a balance over a certain amount once they learn about a bankruptcy filing.

The trustee can ask you about anything related to your financial situation, and most questions will involve your debts, assets, income, expenses, and, importantly, prior transactions.

Can You Spend Money After the 341 Meeting? Absolutely! Any money earned after filing for Chapter 7 bankruptcy is yours to do with as you like because post-filing earnings aren't part of the "bankruptcy estate" or bankruptcy case. You can keep it, spend it, or give it away.

While you are allowed to spend money on essential items such as housing, utilities, food, and transportation, extravagant expenses might be scrutinized by the bankruptcy court. Be mindful of your spending habits and prioritize essential needs to avoid potential complications.

In most cases, your bank account trustee will generally look at your account balance on the filing date of your petition to ensure it matches the information submitted.

Are you concerned if your trustee can check your bank accounts? Under the U.S. Bankruptcy Code, a Chapter 13 trustee can review the state of your finances. That would naturally include your bank accounts. However, there's no reason to worry about a trustee having access to your bank accounts.

The trustee will examine your bank statements for evidence of unreported income and property transfers. The trustee might also compare the amount paid toward monthly bills to the amounts reported in your schedules. Learn more about completing bankruptcy forms.

The court may deny a chapter 7 discharge for any of the reasons described in section 727(a) of the Bankruptcy Code, including failure to provide requested tax documents; failure to complete a course on personal financial management; transfer or concealment of property with intent to hinder, delay, or defraud creditors; ...

The trustee can audit your bank accounts at any time, by requesting your books and records, other documentation, or taking your testimony, to explain the origin of deposits and the reason for withdrawals. If questions remain, the trustee can also ask for a formal audit of your books, records, and assets.

341 Meeting Questions the Bankruptcy Trustee Might Ask

Along with the mandatory questions, trustees typically ask about your property and other assets, income, expenses, and debts. Other areas will include discrepancies in your bankruptcy forms and how you came up with a value for various property items.

What happens 60 days after the 341 meeting? ›

The Court enters an order discharging individual Debtors after all requirements are met, but no sooner than the last day to object to the Debtor's Discharge. This is usually 60 days after the 1st setting of the 341 Meeting of Creditors unless a motion is filed with the court to extend that time.

Derek R. Caldwell. Yes, you can spend money earned after the filing of your case on whatever you need to spend it on. I would not recommend you buy any luxury goods until after the 341 meeting.

Non-Exempt Funds in Checking Accounts

A trustee can ask a bank to unfreeze an account if it contains exempt funds. An individual filing for bankruptcy under Chapter 7 may face an account freeze by a bank. You can let the bankruptcy trustee know about the freeze and ask them to get the bank to release the freeze.

Trustees can look back at any transaction made within 90 days of a bankruptcy filing to see if it applies. Trustees can also look back at certain property transactions and payments to family or friends, a year before the filing.

Some banks will freeze your account as soon as they find out about the bankruptcy. They do it to protect the assets for creditors. In most cases, you or your attorney can ask the bankruptcy trustee to contact the bank and release the freeze. The trustee will likely do so if you're entitled to the funds.

Keeping the cash you've deposited in a bank account isn't easy to do in bankruptcy. Any cash or money you have in the bank on the day you file for bankruptcy becomes property of the bankruptcy estate, and keeping it will depend primarily on your state's exemption laws.

Key Takeaways: Debt collectors may be able to access your bank account to get money you owe. In most (but not all) cases, the collector must get a court order to take money from your account. It generally takes one-to-two weeks for banks to execute a garnishment order.