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Friday, February 20, 2015

Will I Lose My Bank Account Funds If I File Bankruptcy?

One of most common questions I get from potential debtors is, "can the Trustee take the money in my bank account?" If you are filing Chapter 13, it is important to know that there is no liquidation of assets. However, you must go through a liquidation analysis and pay your unsecured creditors at least as much as they would get in a theoretical Chapter 7 bankruptcy. So, the threat of losing assets to liquidation is only present when you file Chapter 7.

The Bankruptcy Code was designed so that individuals could get a "fresh start." Part of that fresh start is making sure that an individual doesn't lose everything to Trustee liquidation. Elimination or discharging all of your debt is an incredible relief; however, it wouldn't mean much if you also lost your home, car, bank account funds, clothing, furniture, appliances, etc. To ensure a fresh start, the Bankruptcy Codes allows for certain exemptions.

Cash in a bank account is protected or exempted with an exemption referred to as "wildcard." Currently, the wildcard exemption has a limit of $12,725.00. However, your ability to exempt the bank account funds may be limited by the other assets you have an ownership in. If you have other assets that require exemption and the wild card is the only way to protect them, there may be a liquidation issue.

If you are considering filing bankruptcy, consulting with an experienced bankruptcy attorney is a must. I, like many bankruptcy attorneys, offer free consultations. When I consult with potential clients I always discuss in detail their assets and the available exemptions so that they know what to expect in Chapter 7 or Chapter 13.

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