How Can I Protect My Bank Accounts When Filing For Bankruptcy?
As we all know, when an individual files a bankruptcy case, they are required to disclose all of their assets, and the total value of those assets is the starting point for determining how much (if any) they must pay to their creditors in the case. So, of course, in my work as a consumer bankruptcy attorney in Southwest Florida, I get a lot of questions about how to protect one’s assets before filing a bankruptcy case. Specifically, one of the most common things that people want to know about is protecting their bank accounts. When it comes to bank accounts, it is mainly about organization. There are several specific exemptions, or protections, that can be applied to bank accounts to shield them from the reach of the bankruptcy trustee so that you can keep that money available to support your family after the case is filed. These exemptions are based on the source of the money that was deposited into the bank account, the most popular ones being wages and social security. The key to protecting the specific types of deposits that are specifically exempt in bankruptcy is to keep those deposits separate from the rest of your non-exempt money and to spend those protected monies after all other types of money that you have. That way, there is no question as to the source of the money that is in your bank account on the date that you file for bankruptcy protection.
For example, if you receive $2,000 per month from Social Security, plus your daughter sends you $500 per month to cover the rest of your expenses, you want to keep the money from your daughter in an account separate from the account where your Social Security is deposited, and then spend all of the money from your daughter first before spending your Social Security money. The reason for that is that, for example, if on the date you file bankruptcy, you have $500 in the account where you keep the money from your daughter, and only $100 in the account where your Social Security is deposited, then only the $100 from the Social Security account is protected from your creditors, and the remaining $500 will be considered non-exempt unless you can apply some other personal property exemption to protect that money. Conversely, if you have $100 in the “daughter’s money” account and $500 in the Social Security account, then only $100 will be non-exempt, and $500 will be protected. As you can see, this analysis can be exponentially more complicated when there is co-mingling of exempt and non-exempt types of deposits, so do yourself a favor and organize your accounts well in advance of filing bankruptcy so that there is no question of how much of your money you will be allowed to keep. It is always a good idea to consult with a bankruptcy attorney about this topic because there are many situation-specific factors that need to be taken into consideration when determining whether or not certain types of income can be protected (ie, self-employment income, tax refunds, proceeds from the sale of an asset, lawsuit settlement proceeds, etc).
This blog was written by Holly McFall, Esq. of The Dellutri Law Group, P.A.. Ms. McFall defends homeowner in the foreclosure process and in the Bankruptcy Court.
