When considering Chapter 7 bankruptcy, you are probably concerned about what happens to the money in your bank accounts. Does filing for bankruptcy mean you should close your bank accounts before filing? Can your checking or savings account be taken by the trustee if you file Chapter 7 bankruptcy?

It is true that your account balances are considered assets in a bankruptcy case. However, filing Chapter 7 bankruptcy does not automatically mean that you will lose all of your funds. 

Bank accounts become part of the bankruptcy estate

All of your property becomes part of the bankruptcy estate once your case is filed. This includes money in your checking and savings accounts. The amount in your account at the time of your filing becomes particularly important.

Before filing, you must gather all relevant financial information, including bank accounts. Your attorney will need this information when preparing your case. 

It may cause a lot of problems if you try to conceal an account or withdraw money just to avoid disclosing it to the bankruptcy trustee. Filing Chapter 7 requires debtors to disclose all information about their finances. 

You can protect your bank accounts with exemptions

Even though your property becomes part of the bankruptcy estate, you may not lose it. 

Bankruptcy exemptions enable debtors to exempt certain property from creditors and the Chapter 7 trustee. Indiana allows debtors to exempt or protect certain property, including bank accounts. 

If there are funds in your account, the ability to protect your account balance will depend on your situation, the amount of money, and the exemptions you have available to you.

Some types of funds can also have special protections under federal or state law. 

For example, there are special rules concerning funds received from certain benefits and transferred to your bank account.

What happens with money you need for bills?

Timing can become an issue when you have some money in your account and plan to use it to pay for rent, utilities, food, and other necessities. However, these funds still become a part of your bankruptcy estate. You should discuss this matter with your Indiana bankruptcy attorney.

You will want to avoid any unusual transactions or money transfers shortly before filing for bankruptcy. This will raise red flags. If you give money to someone else, it may cause problems because the bankruptcy trustee will review all transactions you made prior to filing.

Do you have to close your bank account?

Filing for bankruptcy does not mean you should close any of your accounts. However, there may be additional issues if you owe money to the financial institution where your funds are kept. Your attorney will be able to evaluate these issues and decide the best course of action.

Protecting your finances before filing

The Chapter 7 bankruptcy process is designed to give qualified debtors the opportunity to start fresh financially. However, proper preparation is required for a successful filing. If you’re thinking about filing for bankruptcy in Indiana, you should speak to a bankruptcy attorney before transferring money, closing a bank account, or making any financial transactions.

Talk to a Danville, Indiana Bankruptcy Lawyer Today

Chris Arrington represents the interests of debtors who need to file for bankruptcy in Indiana. Call our office today to schedule an appointment, and we can begin preparing your case right away.