The bankruptcy stay that goes into effect by operation of law freezes all collection activity and prohibits your creditors from attempting to collect a debt against you. That means that your creditors cannot attempt to take the money in your bank accounts, even if they have a judgment against you. So is your money safe? Once you file your case with the Court, any money that you put in the bank after bankruptcy is protected under San Diego bankruptcy law. This includes any money that is deposited in your accounts both during and after the date of your filing.
Can I Put Money in the Bank After Bankruptcy?
Federal law provides that money deposited into your bank account after bankruptcy cannot be taken by your creditors. The reason this rule is that bankruptcy deals with the assets and debts you had before you filed your case. Essentially, after the date you file your case, you begin a brand new financial life, new assets, and new debts, plus you get to keep as much of your assets as allowed by your exemptions. Assets that you had before you filed are called prepetition assets. Assets you acquire after you file (including money from employment) are called post-petition assets and are not included in your filing.
Under San Diego bankruptcy law, the bank is prohibited from taking money earned and deposited into your account at any time during or after the date your case is filed. Such funds would be deemed a post-petition asset and would not be part of your filing. So you can put money in the bank after bankruptcy.
But be careful when it comes to money you had earned before you filed that is in your account on the day that you file: your bank may have “set off” rights to money existing in your bank account on the day that you filed. If you have money in the bank and are considering bankruptcy, be sure to discuss this with a San Diego bankruptcy attorney during your initial consultation so that you and your attorney can have adequate time to protect your interests.
Set Off Rights To Money Deposited Before Bankruptcy
If you have money in an account at a particular bank that you owe money too, that bank may be able to keep the money under what are called “set off” rights. Set off means that if you owe the bank money, and the bank has your money in an account, the bank may be able to keep some or all of the money as a set off against the debt that you owe to your bank. The set off rights can only be asserted against money that you had in the bank account prior to filing bankruptcy. Any money that you put in the account after the date that your case is filed does not fall within the set off rule.
Creditors Going After Money In Bank After Bankruptcy
Creditors are prohibited from going after money in your bank account after bankruptcy, in two respects. First, the automatic stay that goes into effect when your case is filed prevents any type of collection action against you. Second, once you obtain a discharge, all of your dischargeable debts are eliminated. Any creditors whose debts were discharged may not attempt to take the money in your bank accounts. However, if a creditor’s debt is not discharged, then that creditor can continue to attempt to collect the debt. Also, if the automatic stay does not apply to your case, creditors could continue to do a bank levy on your account. For example, if you have filed multiple bankruptcies in the last year, the stay may not apply.
Corporate Bank Account
If you own a corporation, the debts of the corporation are distinct from your debts. If, for example, a creditor has a judgment against both you and your corporation for an unpaid debt, after you file your creditors can still attempt to collect a judgment by levying on the corporate bank account of your corporation.