By the time you've filed for bankruptcy, you've probably endured months of debt-collection calls and the stress of unpaid bills. Filing for bankruptcy should actually bring you a sense of relief and put a stop to the financial crisis. However, there's one thing that you need to do before you file for bankruptcy that's critical to keeping the process smooth. This is what you should know.
Change Your Bank
There are several reasons that you want to open a new bank account somewhere, all of which involve making sure that you have access to the money that you need for gas, groceries, and your regular monthly expenses.
1.) You need to be able to prevent a lien.
Sometimes creditors will rush to get a judgment against you - especially if they think that you are about to file bankruptcy or you've been putting off the decision for a while and the creditor has gotten frustrated.
However, a creditor can't put a lien on an account that it doesn't know that you have. Most of the time, creditors already know exactly where you bank because you've paid the bill in the past. While filing bankruptcy would technically halt the lien, you don't want to be stuck in the position of trying to fight that process out while your only source of money is frozen.
2.) You need to be able to prevent automatic payments.
A lot of people have automatic payments set up for home shopping networks, installment loans, and other bills. Once you file bankruptcy, the automatic payments should be stopped, but you often have to be proactive in order to make that happen and it's not uncommon for one or two to "slip through" even after the bankruptcy is filed in court. Once the money is gone, you won't get it back.
3.) You need to prevent the bank itself from seizing your money.
A lot of people have car loans or mortgages and credit cards through their banks. When you owe money to a bank and also have money in the bank (through your paycheck deposit, for example), the bank has a "right to setoff" against the debt. It can seize any funds it holds including checking, savings, and certificate of deposits to pay off your past-due amounts.
It can then also freeze your account and hold the remainder of your money while you go through the bankruptcy process because until the bankruptcy trustee either allows the bank to take the money or releases it back to you. The bank essentially develops a "possessory lien" on the money - turning your accounts into secured funds against what was otherwise unsecured debts (like credit cards).
If you've come to the realization that you need to file bankruptcy, take the time to go open a new bank account at a credit union or bank that isn't affiliated with your house loan, car loan, installment debts or credit cards. Make sure that you check the backs of any "store" credit cards to see what bank actually issues them, just to be sure you don't accidentally pick the wrong bank!
If your paycheck is sent by direct deposit, ask your employer to pay you with a paper check or change the direct deposit to your new bank. Wait until you know the change has gone through and your paycheck is safely in the new account before you file your bankruptcy. It can mean the difference between sudden relief and a frantic scramble to find money to live on until your next paycheck!
For further assistance, contact professionals, such as those from Brackett & Strunk LLC.