Filing bankruptcy does not prevent an individual from maintaining a checking account either before they file bankruptcy, during the bankruptcy process, or after the bankruptcy is discharged.

All bank accounts including checking accounts, along with all other assets held by the bankruptcy petitioner, must be identified to the court appointed trustee during the bankruptcy process.  Some banks have been known to freeze their customers checking and savings accounts upon filing for bankruptcy.  These policies are usually designed to protect the customer but can be inconvenient while the account holder has to wait until authorization is given to release the funds.

Bankruptcy filers that owe money to the bank or banks where they checking and savings accounts are held at the time of filing may have a potential problem regarding the funds in those accounts.  A bank can exercise its right of offset if there are delinquent accounts held at that same bank.  The right of offset gives the bank the ability to use the funds in the checking and/or savings account to make payments on the credit accounts (credit cards, auto loans, personal loans, etc…) held at the bank that are in default.  The bank may exercise the right to offset at any time there are delinquent credit accounts at the bank and is not based on the account holder’s bankruptcy filing.  The banks’ legal right to seize funds that a guarantor or debtor may have on deposit to cover a loan in default is also commonly referred to as the right of set off.

The bankruptcy process can be complex and the bankruptcy laws have aspects that protect creditors, but bankruptcy protection is designed to specifically protect the individual.  One of the primary purposes of the Bankruptcy Act is to ‘relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes.’  In summary, the bankruptcy code does not prevent someone from keeping or opening a bank account.

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