Chapter 7 Bank Account Lien?


W

Wrightson

Long story short, my wife and I had to file a Chapter 7 on about 80k worth
of unsecured credit card debt due to to medical expenses for our young son
over the past few years. The straw that broke the camel's back was both of
us losing our jobs at the beginning of '09.

Our BK attorney gave us no indication we'd have a problem with any assets
being seized including whatever money was in our checking account. However,
we filed our paperwork on Wednesday and 3 days later this morning on
Saturday, our checking and savings accounts both were frozen with every cent
put on lien totaling about 14k. About 10k was a loan our parents gave us to
get us through this rough patch. We pay all our bills through Bill Pay on
our checking account, thus we face all these "bounced" payments. We now have
zero money for mortgage, food, bills, etc aside from unemployment which we
obviously can't deposit in our checking accounts.

I had asked our attorney several times about how "safe" our bank accounts
were and he repeatedly said there's nothing to worry about as it was
unsecured debt. After talking to him today, he said this was the first time
in his 20 years of practice this has happened in such a situation. He really
didn't sound too helpful as far as what our options may be at this point.

I guess my question to those that may know better is, are we screwed out of
that money? Do we have *any* options? Although we have never been late on
our car or house payment, we will quickly lose what little we have left as
things stand without that "cushion" that was helping us keep it together
through all this.
 
P

patpemberton

Wrightson said:
Long story short, my wife and I had to file a Chapter 7 ....
Our BK attorney gave us no indication we'd have a problem with any assets
being seized including whatever money was in our checking account. However,
we filed our paperwork on Wednesday and 3 days later ....
our checking and savings accounts both were frozen with every cent
put on lien totaling about 14k.
There is a difference between funds being seized and an account being
restrained so that the depositor does not have access to the funds on
but, since frozen, remaining on deposit.

In any case, if this was not done after you filed your petition and
not with the bankruptcy court's permission, what did your bankrutpcy
attorney tell you about the effect of the automatic statutory stay
against this sort of thing?
.... We pay all our bills through Bill Pay on
our checking account, thus we face all these "bounced" payments. We now have
zero money for mortgage, food, bills, etc aside from unemployment which we
obviously can't deposit in our checking accounts

I had asked our attorney several times about how "safe" our bank accounts
were and he repeatedly said there's nothing to worry about as it was
unsecured debt.
This last statement is illogical, suggesting either that you
misunderstood what he said or that in this connection he did not know
what he was talking about.

But it also may be that he assumed that the bankruptcy act's statutory
stay would protect those funds at least for the time being.

And so again, what did he tell you about the effects of and how a
debtor in a Ch. 7 bankruptcy might be able to obtain at least
temporary relief from the violation of the statutory stay if what you
refer to as your
...are we screwed out of
that money? Do we have *any* options?
Of course you have options. But what they are and deciding how to try
to use them will depend on knowing more of the particulars than you
post. For instance, you do not say what sort of creditor caused your
account to be froze - the IRS? a private commercial creditor who had
been awarded a money judgment against you before you filed your
bankruptcy petition? - and your use of the word seized leaves unclear
whether you refer only to a restraint on the account or whether the
money on deposit has been transferred to someone else. But it is
likely that at least for the time being the preimilary question of the
effect or not of the statutory stay needs to be determined.
 
Ad

Advertisements

B

BetaB4

Leaving $14,000 in a bank account when you were about to file bankruptcy
sounds like a bad idea from the get-go. Did your attorney know you had that
much in the account, and did the bankruptcy papers say you had that amount
there?

My guess is that one of your creditors already had a judgment or took other
legal action to attach your assets before the bankruptcy filing and didn't
know yet that you had filed.
 
W

Wrightson

There is a difference between funds being seized and an account being
restrained so that the depositor does not have access to the funds on
but, since frozen, remaining on deposit.

In any case, if this was not done after you filed your petition and
not with the bankruptcy court's permission, what did your bankrutpcy
attorney tell you about the effect of the automatic statutory stay
against this sort of thing?
This was done within 3 days of our filing Chapter 7. Basically, the funds
are frozen but in the account. Our BK attorney claimed to have never seen
this happen to one of his clients before our case. He seems completely
clueless and has been no help.
This last statement is illogical, suggesting either that you
misunderstood what he said or that in this connection he did not know
what he was talking about.
That statement is illogical because in retrospect, our attorney apparantly
had no idea what he was talking about.
But it also may be that he assumed that the bankruptcy act's statutory
stay would protect those funds at least for the time being.
That's a possibility but as the week wore on, it appears he's totally out of
his element.
Of course you have options. But what they are and deciding how to try
to use them will depend on knowing more of the particulars than you
post. For instance, you do not say what sort of creditor caused your
account to be froze - the IRS? a private commercial creditor who had
been awarded a money judgment against you before you filed your
bankruptcy petition? - and your use of the word seized leaves unclear
whether you refer only to a restraint on the account or whether the
money on deposit has been transferred to someone else. But it is
likely that at least for the time being the preimilary question of the
effect or not of the statutory stay needs to be determined.
Here's more detail.........

Wells Fargo themselves froze our accounts within 3 days of our filing BK
Chapter 7. My understanding is their bankruptcy Division actively monitors
BK filings by social security number and any time a Wells Fargo account
holder's SS# shows up in their database has having a BK filing, they
pro-actively freeze funds in that person's account to "hold" funds on behalf
of the Trustee until the Trustee either releases those funds in part or in
whole or siezes them to pay off the creditors. We have no prior judgements,
lawsuits or liens of any kind.

We have no debt of any kind with WF - all debt is unsecured credit card debt
with other institutions such as BofA. The money that has been frozen totals
a bit over 14k and was included in paperwork as being protected under the
California "Wild Card" exemption which is over 21k.

We have been trying to work with the Trustee assigned to our case to get our
accounts unfrozen, however, thus far he and his office has been mostly
unresponsive. We were told mid last week our paperwork would be "reviewed"
but nothing has changed as of today (Monday). My gut feeling is the Trustee
is waiting for the 341 hearing hoping the BK court will "give" him the money
to disperse to creditors.

Our 341 hearing is the 2nd week of June.
 
P

patpemberton

This was done within 3 days of our filing Chapter 7. Basically, the funds
are frozen but in the account. Our BK attorney claimed to have never seen
this happen to one of his clients before our case. He seems completely
clueless and has been no help.
.....
Here's more detail.........

Wells Fargo themselves froze our accounts within 3 days of our filing BK
Chapter 7. My understanding is their bankruptcy Division actively monitors
BK filings by social security number and any time a Wells Fargo account
holder's SS# shows up in their database has having a BK filing, they
pro-actively freeze funds in that person's account to "hold" funds on behalf
of the Trustee until the Trustee either releases those funds in part or in
whole or siezes them to pay off the creditors. We have no prior judgements,
lawsuits or liens of any kind.

We have no debt of any kind with WF - ...
If WF acknowledges that you do not have debt of any kind to that bank,
then an obviously relevant and indeed hardly minor detail you forget
to mention is what basis in law or in fact WF claims entitles it to
freeze your account *regardless* whether you did or did not seek
bankruptcy protection.
...all debt is unsecured credit card debt
with other institutions such as BofA. The money that has been frozen totals
a bit over 14k and was included in paperwork as being protected under the
California "Wild Card" exemption which is over 21k.

We have been trying to work with the Trustee assigned to our case to get our
accounts unfrozen, however, thus far he and his office has been mostly
unresponsive. We were told mid last week our paperwork would be "reviewed"
but nothing has changed as of today (Monday). My gut feeling is the Trustee
is waiting for the 341 hearing hoping the BK court will "give" him the money
to disperse to creditors.

Our 341 hearing is the 2nd week of June.
In other words, you have more than two weeks to find an attorney who
is genuinely knowledgeable about and experienced in dealing with these
sorts of issues on behalf of an individual bankrupt instead of
wallowing in avowed befuddlement as you indicate has been and remains
so for your present lawyer.
 
S

socallawyer

If WF acknowledges that you do not have debt of any kind to that bank,
then an obviously relevant and indeed hardly minor detail you forget
to mention is what basis in law or in fact WF claims entitles it to
freeze your account *regardless* whether you did or did not seek
bankruptcy protection.
This is becoming a common practice with most major banks in the United
States in just the past year. It does not matter if the filer is a
debtor to the bank through a defaulting mortgage or other loans or
credit card defaults. It has already been contested in several cases
with some success but it continues unabated.

Most bankruptcy attorneys are aware of this new practice and we urge
our clients to withdraw as much money as they feel comfortable as far
in advance of filing as possible leaving only enough to maintain their
account status active. These links should answer your questions.

Simple answer:
http://en.allexperts.com/q/Bankruptcy-Law-909/2008/10/chapter-7-bank-account.htm

More in-depth:
http://bklaw.com/bankruptcy-blog/2009/03/bank-accounts-freeze/

Legal actions regarding bank "pre-BK account liens."
http://www.whitecase.com/files/Publication/9461284c-e8d3-49d3-b844-69db5bced5df/Presentation/PublicationAttachment/23e1d8f6-44d4-4ead-a288-6ef279cf9608/article_Hollander_Pratts_Bankruptcy_Court_Punishes.pdf

As for your other question or comment:
In other words, you have more than two weeks to find an attorney who
is genuinely knowledgeable about and experienced in dealing with these
sorts of issues on behalf of an individual bankrupt instead of
wallowing in avowed befuddlement as you indicate has been and remains
so for your present lawyer.
You may be unaware once a chapter 7 has been filed through a specific
attorney, the client cannot choose another or additional attorney to
represent them through the 341 and discharge except under extreme
circumstances authorized by the court. Although it sounds like Wright
son may have a legitimate complaint that the case trustee would at
least consider, I honestly don't think at this point it would serve
the client's best interest unless there are gross errors in his
filing.

Unless there is other assets that bring the amount above (I assume
you're filing in) California's wild card provision, you should get
your funds released back to your account during the 341 hearing by the
trustee.
 
Ad

Advertisements

B

BetaB4

I just realized that you meant that Wells Fargo is your bank, and you have a
bank account with them that they froze upon your filing of a bankruptcy
petition.

I also just read in a bankruptcy Yahoo Group called Bankruptcy_Talk (
http://finance.groups.yahoo.com/group/Bankruptcy_Talk/ ) that two banks --
Wells Fargo and Union-something Bank -- do that when any of their account
holders file bankruptcy.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top