Personal bankruptcies can be filed under Chapter 7 or Chapter 13. If you qualify for a Chapter 7 bankruptcy, all of your debts are forgiven when your bankruptcy is discharged. A Chapter 13 bankruptcy requires you to pay a portion of your debts to your creditors over a three- to five-year period. You can open or retain bank accounts under most circumstances.
Chapter 13
If you currently have a bank account, you can continue to use it while you are making payments under Chapter 13. The trustee will review all activity in your account for 90 days prior to your file date. This is to ensure that you made no frivolous expenditure during that time. The trustee will closely monitor your expenses during the entire term of the bankruptcy. If you do not have a bank account, you should open one prior to filing. Many banks will obtain a copy of your credit report prior to opening an account and will not open one if you are in bankruptcy.
Chapter 7
You must declare any account balances that you have when you file. The judge will allow you to retain a limited amount of funds. Keep the balance at $3,000 or less. If the judge believes you have excessive assets, he will seize the excess and distribute the funds to your creditors.
Deposit Offsets
If you have a credit card or an installment loan with your bank, close any checking or savings accounts and remove any deposits before you file for bankruptcy protection. The bank can seize your funds as an offset for your debts. This can happen as soon as you file and the bank receives notification. In addition, if you have any automatic deposits such as a direct deposit of your paycheck, open a new bank account and reroute the funds to an institution where you do not have any outstanding debts.
Conclusion
It is possible and usually necessary to have a bank account before and during a bankruptcy. If you are employed, you will need to deposit your paycheck, and you will need to pay utility bills and purchase groceries. If you are in Chapter 13, you will need to send the trustee a check every month. You can cash your check and pay with money orders, but that is an unnecessary burden. Chapter 7 bankruptcies usually are discharged in two or three months, but Chapter 13 cases last for three to five years.
