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Can Bankruptcy Clean Out Personal Accounts

Nov 17, 2007
Filing for bankruptcy takes a huge chunk out of your credit report, your pride, and your future abilities to get credit. It is bad enough that you are going to have it on your credit report for several years afterward, and you do not want it to affect anything else to make your financial situation even worse. So what happens to your savings and checking accounts when you file for bankruptcy?

When you file for bankruptcy, it is because you owe money to your creditors, obviously. So if your creditors know that you have money in your checking or savings accounts, they will usually freeze those accounts and seize them so that they can get all the money they can out of you before you put them out by going bankrupt. The way they see it, if you have any money stuffed away at all, it is theirs to take because you owe it to them.

Because this is, in a cold and heartless way, generally true, they have the right to freeze your account. Some creditors will not do so, but most will try by all means to get whatever money they can out of you so that the amount that they are having to just let slide is as small as possible. They basically have to get permission from the courts to do so, but many frozen accounts are a result of desperate creditors out to milk desperate debtors for all they're worth.

To freeze a bank account means simply that you no longer have access to your account. If your checking account or savings account is frozen, that means that you no longer have the ability to withdraw from that account. It basically ceases to be accessible, except if you want to make a deposit.

Credit card companies, banks, and credit unions alike can freeze your bank accounts. When you file for bankruptcy, the credit card companies that you may owe money to will have long since denied you access to your credit account, therefore giving you no ability to buy on credit. Similarly, banks and credit unions cease to give you any kind of services once you have filed for bankruptcy, and they almost always remove your
membership from their particular credit union or bank, refusing to do any more business with you.

Why? Well, because you took out bankruptcy, you are more likely to do it again, and of course they don't want to be giving you a loan in the future if it is uncertain that you will pay it back in full. Also, because you filed for bankruptcy and cost them money that you could not pay, that alone would be motivation enough to stop doing business with you.

Bankruptcy is rough in itself. Sadly, it can affect your bank accounts too. If you want to do something about this, contact the lawyer who issued the freezing of your account, and see if you cannot work something out with him and the creditor you owe the money to.
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