Why does my bank account need to be low when I file bankruptcy? Do I have to keep it low for the whole bankruptcy?

Your bank account has to be low on the day we file because there’s a chance the trustee will order you to give him those funds.  bank account balance

On the day we file bankruptcy, everything you own becomes an asset of the bankruptcy estate.  This means that if you have any assets that we cannot exempt (protect), then, in theory, the trustee can sell off those assets to pay your creditors.  So if you filed bankruptcy and had $10,000 in your bank account, then the trustee could order you to withdraw those funds, give them to him, and he would use them to pay creditors.  (None of my clients have $10,000 in their bank accounts, in case you were wondering).

But it’s only on the day of filing that matters.  Your bankruptcy estate is a snapshot of what you owned at the moment we filed.  So, I like to file bankruptcy on a Thursday, before payday, because the accounts are low.

After you file bankruptcy, you keep using the account as normal.  You can deposit or withdraw as needed.

Now when we meet with the trustee, he will want a copy of your bank statement showing the balance on date of filing and the 30 days of transactions around it. This way he can tell if you did anything improper, like quickly withdrew $2,000 a couple of days before filing and kept the money hidden in your dresser drawer.

So, to sum up, only the day of filing matters, and we want it low so that the trustee doesn’t order you to turn it over.

This is not legal advice.  If you need help, go to www.robertspaynelaw.com.


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