What Happens to the Money in Your Bank Account If You File for Bankruptcy?
A bankruptcy case is an agreement between you and the court. The court agrees to make eligible creditors go away and stop trying to collect debts that you cannot repay. In exchange, you must be transparent with the court about your financial situation so that you pay an amount toward your debts that, according to the court’s judgment, you can pay, before the court discharges the remaining balance, thereby freeing you of the obligation to pay it. When you have a pending bankruptcy case, that is, between the time you file for bankruptcy and when the court discharges your debts, your property becomes part of your bankruptcy estate, which means that the court has a say in what happens to it. In some cases, the court can take money from your bank account and pay it to creditors to settle your debts, but you can usually prevent this by planning your bankruptcy filing wisely. To find out more about protecting the money that becomes part of your bankruptcy estate, contact a Plantation chapter 7 bankruptcy lawyer.
How Much Control Does the Bankruptcy Court Have Over Your Bank Account?
During a bankruptcy case, the court can order you to use funds from your income or savings to pay creditors. Remember that the goal is bankruptcy protection, so it will not order you to pay so much that doing so would leave you destitute and unable to afford necessities. It determines how much you can pay by carefully examining your income, assets, and expenses.
In a chapter 13 bankruptcy cases, which are designed for people who have a stable income, involve the court ordering you to pay a debt settlement amount in monthly installments over the course of several years. The court does not liquidate your assets or garnish your bank accounts; if you do not keep up with payments, the bankruptcy court will convert your case to chapter 7, which does allow the court to liquidate assets to settle your debts.
If you file for chapter 7 bankruptcy, the court can use non-exempt assets to pay your creditors. Some possessions are exempt, such as the house which is your primary residence and the car you drive. Some sources of income are also exempt, such as disability payments and retirement income. Employment income is also exempt if you are the head of household, meaning that you do not depend on anyone else financially.
Protecting Your Money During a Bankruptcy Case
By consulting a bankruptcy lawyer before you file for bankruptcy, you can ensure that you understand which of your assets are exempt from chapter 7 liquidation. You can also make an informed decision about whether you can afford to file for chapter 13.
Work With a Debt Lawyer About Getting Through Bankruptcy With as Few Financial Losses as Possible
A South Florida debt lawyer can help you if you are considering filing for bankruptcy, but you are worried about the court taking money from your bank account. Contact Nowack & Olson, PLLC in Jupiter, Florida to discuss your case.
Source
uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics
