That is one of the most frequently asked questions I get from clients. Often, it’s not phrased as a question, but as a statement: “I know I can’t keep my bank accounts if I file bankruptcy.” This perception is so common that it almost rises to the status of urban legend. As with most urban legends, this one is almost entirely myth.
In most cases, your bankruptcy will have little or no effect on your bank accounts. If you don’t owe your bank any money (such as overdraft protection accounts, mortgages, personal loans, etc.) there is no reason to think that a bankruptcy will affect your account at all.
If your accounts are at a bank that is also a creditor, i.e., you have borrowed money from the bank, the money in your account may be subject to a claim by the bank to pay the debt you owe. This is true whether or not you file bankruptcy; a bank generally has a right to set off accounts against a debt you owe, but they rarely exercise that right against individual consumers. Of course, the bank will close any open lines of credit, but may decide not to close the deposit account at all. A bankruptcy may sometimes prompt the bank to freeze your account, and the bank may then ask the bankruptcy court to allow them to apply the money in the account to the amount you owe. Although this is still rare, it can have a serious effect if it also causes you to bounce checks, and can hinder your efforts to make a fresh start. I generally recommend to my clients in that situation that they open another account at a different bank (where they owe no money) before the bankruptcy is filed. Alternatively, they may choose to they leave only enough money in the account to keep it open until after the case is filed. That is to prevent the loss of funds, or the freezing of the account.
In short, if you have an account at a bank where you have not borrowed money, bankruptcy should not affect your relationship going forward. If your bank is also a creditor, you may want to open account somewhere else, so that your bankruptcy does not affect your banking relationship. Of course, it is always a good idea to discuss these matters with your bankruptcy attorney. Your experienced bankruptcy attorney will advise you about your specific situation.
