Cash and bank accounts (checking, savings, CDs) are property of your bankruptcy estate. You must provide your bankruptcy attorney with exact bank balances as of the date of your bankruptcy filing for all bank accounts. You can obtain this information over the Internet by logging into your account or by calling the bank. Knowing these balances is vitally important to being able to keep all the property to which you are entitled.
When you calculate your balances, you should be aware that although you may have written checks against this account, until those checks clear, they do not reduce the balance in your account. The actual balance in your account is the balance that you must list on your bankruptcy schedules. For example, if your check register shows $37 in your account because you have written several checks the day before you filed, then $37 is not the balance of your account. The balance of your account will include all funds as of the day of your filing, regardless of whether checks are outstanding. Put simply, your balance is what your bank says it is.
In some cases bank balances are not very important. However, as a general rule, it is a good idea to have your bank balances as low as possible. You can do this by paying all of your normal monthly bills (utility bills, car payments, mortgage payments, and any other normal monthly expenses such as groceries). You are allowed to keep a certain amount of property. The property you are allowed to keep is provided for in the exemption statute applicable to your case. (That may be the Bankruptcy Code or your state’s statute, depending where you live.) The higher your bank balances, the fewer exemptions you will have left for other property such as tax refunds and vehicles. Note that I said you should pay normal monthly bills. This does not mean you should pay your mortgage ahead six months or pay your mom back for that money she loaned you. If in doubt about what you should pay, you should contact your bankruptcy attorney.
Important: Simply withdrawing the cash does not help the situation. Withdrawing cash just means that we must list money that was in your bank account as “cash” on your schedules. The money needs to be spent on legitimate, normal living expenses as discussed above. Furthermore, lying on your bankruptcy schedules is a big “no no.” Lying to the court can lead to a denial of your discharge and, more importantly, it’s a felony. Losing your discharge and going to prison would be a bad outcome to your bankruptcy case.
Think of your property exemptions as a valuable commodity. Exemptions are important and deserve your full attention. Carefully planning on how you will use your exemptions is important in almost any bankruptcy case.
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Last modified: October 22, 2012