Creditor Levies on Bank Accounts After a Debtor Files Bankruptcy
A San Francisco bankruptcy attorney comments on creditor levies....
San Francisco bankruptcy attorneys and debtors alike will notice that there will be times when their bank accounts have been levied by the creditor or their wages have been garnished because they did not pay their debts off in time. In the past couple of years, a couple of banks have started freezing the debtor’s funds in their deposit accounts when they file a Chapter 7 bankruptcy case. The two more prevalent banks that do this seem to be Wells Fargo Bank and Union Bank. They do this regardless of whether they are owed money by the debtors. This has resulted in a great deal of confusion among clients, as well as unsuspecting bankruptcy attorneys who fail to advise their clients of this possibility.
The reason why a bank can do this is that when a Chapter 7 bankruptcy case is filed, everything the debtor owns or has an interest in becomes property of the Chapter 7 trustee and the trust estate. That includes everything from your house to personal assets to money in your bank accounts. All these assets in a Chapter 7 bankruptcy is investigated by the Trustee to determine if any of it can be liquidated to pay off the creditors, unless there is a valid exemption for the asset. Therefore, if there are more funds in the deposit account than the exemption value, then the Trustee may be able to freeze the account and liquidate those funds to pay off the creditors.
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