If a bankruptcy debtor has funds in a bank account and the debtor owes a debt to the same bank, under certain circumstances, the bank may be permitted to take the funds.
A debtor may owe a debt to a bank, based on various reasons, such as non sufficient fund charges or having a credit card debt with the same bank. Also, a debtor may have a savings or checking account with the same bank. Under either scenario, the bank may be able to keep the debtor’s bank account funds in an amount that is less than the amount that is owed to the bank. However, in general, the funds must have been placed in the account more than 90 days prior to the bankruptcy filing.
Typically, the process works as follows: After the bankruptcy filing, the bank would freeze the funds in the account. Thereafter, the bank would file the appropriate papers with the court, requesting permission to turnover the funds to the bank.
The moral of this story is, do not leave funds in a bank that is owed a debt.
Robert Manchel, a New Jersey bankruptcy lawyer, may be reached at 1 (866) 503-5655, to discuss your questions regarding bankruptcy protection.