Filing bankruptcy itself is an emotional and sometimes embarrassing situation. However, after the bankruptcy is all said and done, you are still going to need a bank account in order to conduct normal financial transactions and start developing good financial skills.
Bank Accounts May be Protected
Filing for bankruptcy doesn’t have to mean you are required to close all of your bank accounts that already exist. Unless you owe that particular bank money, it may not be affected by your bankruptcy and if so, it won’t be automatically closed.
However, if you do owe that bank money for something like a mortgage or other loan, then they may be allowed to involuntarily take funds from your existing accounts. This process is called a set off, read the full details of a set-off here.
If you have dependents, some states allow exemptions that protect a certain amount of your earnings that are necessary to support your family’s day to day expenses like food, rent, etc. This is normally the last two months’ worth of your pay.
Opening a New Bank Account after Bankruptcy
While there is no law that says a person can’t open a new banking account after filing for bankruptcy, many banks may not want your business, especially if they were among the creditors that you owed money to prior to the bankruptcy. Some lawyers advise their bankruptcy clients to open an account at a new bank prior to the bankruptcy so that it won’t be affected after it is over.
In addition, any money in an existing bank account could be frozen and be considered as assets in settling your bankruptcy and you may not be able to use it at all, which means finding a new bank is imperative to avoid the hassle of trying to get your paycheck cashed or paying any bills not involved in the bankruptcy like your rent, utilities or food.
Try Small Local Financial Institutions
Smaller banks and local credit unions are likely more open to allowing you to open a savings or checking account. Financial institutes are more receptive if you have a stable job and income coming in on a regular basis, though some may require collateral such as putting cash into a Certificate of Deposit.
It is normally easier to get a savings account and then the financial institute will be more willing to let you have a checking account after a few months of being in good standing with that bank or credit union.
The bottom line is that a bankruptcy doesn’t have to destroy your ability to have a checking or savings account at a bank or credit union. It all depends on things like the bank’s policies and if you were a previous client with an account prior to the bankruptcy and owed them money.