Stop Automatic Payments Before Filing
Once creditors receive notice of your bankruptcy filing, they’re supposed to stop automatic or charges. However, if you’ve authorized automatic deductions taken from your bank account, paycheck, or credit card, it’s unlikely that they’ll stop the instant you file for bankruptcy. And sometimes when you request that automatic payments stop, it takes a while for that to happen.
One way to make sure you aren’t short on the funds you’ll need to pay living expenses after filing for Chapter 7 or 13 bankruptcy, it’s wise to stop automatic payments well before you file.
This is particularly important if you have authorized a creditor to:
- debit your bank account for a debt that will be discharged
- collect money from your paycheck for a debt that will be discharged, or
- charge your credit card for ongoing services.
Reach Out To Our Team Today In North Or South Carolina
At Farmer & Morris Law, PLLC, our team is here for you during this challenging and stressful time. Even with resources from the U.S. Courts, U.S. bankruptcy law is complex to navigate alone. We leverage our knowledge in this area of law to help our clients discharge their unbearable debts.
We have multiple locations throughout North Carolina, with our main office located in Rutherfordton and an additional office in Spartanburg, SC. You can learn more about our team and the services we provide now by dialing . We have someone who can answer your questions today.
How To Ensure That Your Additional Funds Are Not Seized
If you don’t want your trustee to mistake funds that you are allowed to keep as funds that you’re trying to hide from the court, it’s important that you’re completely transparent when it comes to revealing all of your finances. It’s worth noting that during the process of filing for Chapter 13 you will be required to reveal all of your financial statements. For example, you’ll need to reveal the current state of each of your bank accounts, your state and federal tax returns for the past four years, and documents that are associated with any investments which you may currently hold.
If you are completely transparent about the state of your finances and your income and have been allowed to keep some of the money which you earn each month, your trustee will be made aware of this fact. So they won’t seize this money in order to pay for your debts and you’ll be free to spend these funds in any way you choose.
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Does A Trustee Monitor Your Bank Account During A Bankruptcy Will They Ask For Further Bank Statments
- Posted on Sep 2, 2012
In addition to bank statements, make sure to provide the trustee with any other documents: tax returns and refunds, insurance policies, etc. The trustee can ask that your discharge be revoked if you fail to comply.
This firm is in the business of helping people and companies file for bankruptcy protection. Therefore, the bankruptcy code requires that we call our firm a “debt relief agency.”This information is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the related issues. Nor is this advice intended to create a client – attorney relationship. Every individual’s factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state or locality regarding specific information.
Generally Speaking The Funds You Have In Your Bank Accounts Are Safe When You File For Chapter 13 Bankruptcy
By Mher Asatryan, Contributing Author
Debtors filing for Chapter 13 bankruptcy ordinarily do not have to worry about what will happen to their checking or savings accounts. In fact, during the course of the Chapter 13 plan, debtors are able to open new bank accounts and even have plan payments automatically deducted from their bank accounts each month. Chapter 13 also allows debtors to keep bank account funds in excess of the allowable exemption amount provided the excess amounts are worked into the Chapter 13 plan and paid back over the life of the plan.
Read on to learn more, or if you’re thinking about Chapter 7, see What Happens to Your Bank Accounts in Chapter 7 Bankruptcy?
However, Chapter 13 is not free of threats to bank accounts. Debtors may face a problem if, at the time of filing for Chapter 13, they owe money to the bank or credit union in which their funds are deposited. Also, some banks have been known to freeze accounts upon filing for bankruptcy until the judge gives authorization to release the funds. These issues are addressed in greater detail below.
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What Questions Does A Trustee Ask
9.A Trustee Might Ask Other Questions.
- How did you value your home?
- How did you value your car?
- Do you have any claims against anyone?
- Are you expecting an inheritance?
- Did you recently sell any property.
- Have you transferred any of your assets?
- Is the Tax Return that you have supplied a correct copy of your tax return?
Exemptions For Reasonable Expenses
Your trustee will allow you to retain in your bank account a reasonable amount of money to cover your typical living expenses. This is particularly true if you have a small amount in your bank account from your recent pay and that amount is earmarked for current needs.
Here is an example:
Joe is filing bankruptcy on the 30th day of the month. He has $1,200 in his bank account. On the 1st of the month, Joe will pay his rent for the month of $1,000. So Joe doesnt really have $1,200 he only has $200, because $1,000 is already spoken for, to pay his rent for next month.
How much is reasonable? That will depend on your unique situation and the province you live in. In Ontario, a typical guideline would be expenses you would be incurring over the next few weeks. The amount you will be paying for rent, groceries, and transportation between now and your next paycheque would be reasonable, and under typical circumstances would not be seized by your trustee. , including those for a reasonable amount of cash you can keep on hand for living expenses.
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Do Trustees Monitor Your Bank Accounts In Chapter 13 Cases
- Posted on Jan 16, 2016
Most Chapter 13 Trustee’s are administering thousands of cases and they simply don’t have the resources or manpower to monitor Debtors’ bank accounts. Most jurisdictions prohibit a Debtor from incurring any additional debt, entering into any credit transactions, or liquidate any property, while they are in an active Chapter 13 case without first obtaining Court approval. The letter you are receiving from the Chapter 13 Trustee is attempting to remind you of the above restrictions. Tax preparation companies offer “fast or rapid refunds” which are basically a loan secured by the tax refunds you are entitled to receive. They don’t do it for free, there are costs assessed and other hidden fees. Chances are if you completed the mathematical calculations, you would find that the interest and costs you pay your tax preparer are worse than any of the debts that caused you to consider filing the bankruptcy in the first place. The instant gratification from getting your tax refunds right now will result in you spending the money on items that you probably wouldn’t if you simply waited the couple of weeks more to get the entire refunds through the normal processing. Use the extra time to actually evaluate the best use for the tax refunds, and don’t get suckered into taking less now instead of more later. Best of Luck to you.
How Often Do Bankruptcy Trustees Check My Bank Account
The court-appointed trustee in charge of your bankruptcy has broad powers to review all of your financial records, including your bank accounts, while your bankruptcy is in process. The trustee may choose to check your bank accounts whenever he feels a need, though there are several key points in your bankruptcy when the accounts will definitely be under review.
Read More: What Is a Partial Bankruptcy?
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Preparing Official Bankruptcy Forms
When you file for bankruptcy, you might be surprised at the amount of data youll need to gather. To start, youll list your creditors and the amounts you owe your assets, their values, and whether you can exempt the property your income for the last six months and your monthly expenses. Youll also disclose previous asset transfers, such as a car sale or large gifts of property or cash.
The bankruptcy trustee will compare the amount you claimed was in your bank account when you filed for bankruptcy against the actual balance.
You or your attorney will reduce the information into a packet of schedules and statements. Youll review them for accuracy and completeness, sign them under penalty of perjury, and your attorney will file them to start your case.
If you dont take the effort to make sure that your paperwork is correct and complete or if you lie about the information you disclose, your bankruptcy case can get dismissed, you might not receive a discharge , or the court can proceed with a criminal prosecution.
Does The Trustee Monitor Your Bank Account
The trustee may conduct periodic reviews of your finances, including your business and personal bank accounts, to ensure you have sufficient cash to continue making payments as normal. The trustee also reviews your bank accounts to make sure youre not hiding assets from the court and your creditors.
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The Trustee Will Verify The Bank Statement Balance
For the most part, the bankruptcy paperwork provides a snapshot of your financial picture on the day you file your case. A lot of the values youll list wont change very quickly. For instance, its unlikely that your car would depreciate much over a few days or a week .
Your bank accounts are different. If youre like most people, your checking account balance changes every day and sometimes every hour. One day it might have nothing in it, and the next will show several thousand dollars. Its hard to pinpoint the exact balance until after all withdrawals have been made. Because of that, many debtors estimate the amount they expect to have in their deposit accounts on the day they file their case.
The trustee doesnt put much stock in your estimates. Youll have to turn over bank statements that reflect your bank balance on the day you filed for bankruptcy. The trustee will compare the amount you claimed on your bankruptcy paperwork against your actual balance. The trustee might also ask you questions about your bank statements at the 341 meeting of creditorsthe one hearing all filers must attend.
The trustee isnt trying to nickel and dime you, but rather to determine the value of the nonexempt property that you cant protect. If you estimated your bank balance at $100, but it was, in fact, $1,500 on the day you filed, you havent claimed $1,400 of it, and it will likely be nonexempt, which means the trustee will take it and use it to pay your creditors.
My Wage Is Being Garnished
Normally, bankruptcy stops your wages being garnished for a debt, if you include it in your bankruptcy. Its your responsibility to inform your trustee of any garnishee orders. If your wage is still being garnished, contact your trustee.
An exception is if the Australian Taxation Office issues a garnishee order against you before your bankruptcy starts. This allows the ATO to garnish your wages during bankruptcy to offset any debt to them.
Note: This only applies if the ATO has a statutory garnishee notice .
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Talk To A Bankruptcy Lawyer
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Does A Chapter 13 Trustee Check Your Bank Account
It is a common myth that a trustee in a Chapter 13 Bankruptcy will continuously monitor your bank accounts throughout the 3-5 year payment plan.
As you work with your attorney to file a bankruptcy, the Schedule A/B portion of the petition does require you to disclose the amounts of funds you have available in your bank accounts as of the date of the case filing. Generally, you will not need to provide copies of your bank statements. However, depending on the trustee appointed in your case your trustee may request to see your bank statements if he or she requires further verification of income, expense, or asset information.
Your assets will be protected in a Chapter 13 Bankruptcy. This is one of the most important objectives behind filing Chapter 13 Bankruptcy and an important reason to have an attorney guide you through the process.
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Your Bank Account Balance
Filing a Chapter 7 bankruptcy requires you to be open and honest. As you complete your bankruptcy forms, you will want to ensure that you are transparent about your financial situation. The bankruptcy trustee assigned to your case will want to review your bank account statements before your 341 meeting to verify the information you put on your bankruptcy forms matches your bank statements. The trustee will use these statements to get a glimpse into your financial history.
Your bankruptcy trustee can ask for up to two years of bank statements. The trustee will look at your statements to verify your monthly payments to make sure they match the expenses you put on your bankruptcy forms. For example, if you listed your car loan as $500 a month, the trustee will use your bank statements to ensure that amount is being reflected on your bank statements.
Take note, the balance in your bank account is based on an âactual balance.â Any checks that you have written out to someone else, a creditor such as your real estate mortgage lender, etc. but have yet to be cashed, is considered money that is available to you and can be deemed as property of the bankruptcy estate. The bankruptcy trustee wonât care if you wrote checks to pay your mortgage on your real estate and it didnât clear. Knowing your actual balance the day of filing is vital to ensuring your money is safe.
The Bankruptcy Trustee Reviews Your Bankruptcy Papers Carefully To Look For Hidden Assets Avoidable Transfers Improper Exemptions And More
By Cara O’Neill, Attorney
COVID-19 Updates: Retirement and Stimulus Fund Protections Safe Filings.
If you’re one of the millions laid off due to COVID-19, bankruptcy can erase bills while keeping most retirement accounts intact. And you don’t need to worry about losing your stimulus fundsthe new bankruptcy “recovery rebate” law protects stimulus checks, tax credits, and child credits. Bankruptcy lawyers will consult with you virtually, and courts continue to hold 341 creditor meetings telephonically or by video appearance unless an in-person meeting is necessarysee the U.S. Trustee’s 341 meeting status webpage for details.
Streamline your researchtake our bankruptcy quiz to identify potential issues and learn how to best proceed with your bankruptcy case.
One of the primary duties of the bankruptcy trusteethe official appointed to oversee your caseis to find money to repay creditors.
In Chapter 7, the trustee looks for property to sell or additional income to justify converting the case to Chapter 13. In Chapter 13, the trustee checks whether you couldor shouldbe paying more to creditors than what you’ve proposed.
In both cases, the bankruptcy trustee will:
- review the exempt property list to determine whether you can keep all of your assets
- compare your income to the financial documents provided
- inspect your budget for reasonableness, and
- look for signs of transferred or hidden assets.
Your Bank Might Freeze Your Account After Chapter 7 Bankruptcy
Many banks and credit unions freeze the bank accounts of individuals filing for bankruptcy even when the debtor doesn’t owe the bank money. The banks’ position is that all of the debtor’s assets come under the control of the bankruptcy trustee immediately after filing for Chapter 7 until the debtor receives a debt discharge, and that freezing the accounts protects the funds for the trustee.
Of course, it’s a hardship for debtors who are frozen out of the account without warning. But the solution is often simple. The debtor or the debtor’s attorney can contact the Chapter 7 trustee. If the funds are exempt, the trustee will usually instruct the bank to give the debtor access to the account, although it might take a few days. Otherwise, the debtor must file a motion with the court to have the funds released.
How to avoid this problem. As discussed above, you’ll want to consider paying your bills before filing for bankruptcy. Ensure a minimal balance by withdrawing the funds and using cash for your debts. Just be sure to use the funds before you file and keep good receipts.