Chapter 7 Bank Account Lien?

Discussion in 'Bankruptcy' started by Wrightson, May 3, 2009.

  1. Wrightson

    Wrightson Guest

    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.
     
    Wrightson, May 3, 2009
    #1
    1. Advertisements

  2. Wrightson

    patpemberton Guest

    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 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
    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.
     
    patpemberton, May 4, 2009
    #2
    1. Advertisements

  3. Wrightson

    BetaB4 Guest

    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.
     
    BetaB4, May 5, 2009
    #3
  4. Wrightson

    Wrightson Guest

    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.
    That statement is illogical because in retrospect, our attorney apparantly
    had no idea what he was talking about.
    That's a possibility but as the week wore on, it appears he's totally out of
    his element.
    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.
     
    Wrightson, May 11, 2009
    #4
  5. Wrightson

    patpemberton Guest

    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.
    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.
     
    patpemberton, May 13, 2009
    #5
  6. Wrightson

    socallawyer Guest

    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/Publ...ollander_Pratts_Bankruptcy_Court_Punishes.pdf

    As for your other question or comment:
    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.
     
    socallawyer, May 14, 2009
    #6
  7. Wrightson

    BetaB4 Guest

    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.
     
    BetaB4, May 15, 2009
    #7
    1. Advertisements

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 (here). After that, you can post your question and our members will help you out.