Guide to Surviving the Bankruptcy Process
Will My Bank Accounts Be Seized During Bankruptcy?
Jim Bowser | July 14, 2010
One common fear that many debtors have is that the money they have left in their bank accounts will be taken away by the courts if they file for bankruptcy. Thankfully, this is not the case. According to Jim Bowser, a bankruptcy lawyer in Mt. Clemens, Michigan, who is in practice at Bowser & Associates, P.L.C., neither creditors nor the courts will take away a debtor’s money once an automatic stay goes into effect.
Once a person files for bankruptcy, something known as an automatic stay will be enforced. During this time period, it could be a violation of federal law for any creditor—including the federal government, state government, or any other private entity—to seize money from a debtor’s bank accounts.
The automatic stay is a key component of every type of bankruptcy case, including consumer bankruptcy cases such as Chapter 13 and Chapter 7, along with Chapter 11 cases, which are usually reserved for businesses, corporations, and LLCs. Bowser says that family farmers can even expect to receive an automatic stay when they file a Chapter 12 bankruptcy, although that is far less common.
The courts have been very clear on the area of the law pertaining to automatic stays during bankruptcy cases, and according to Bowser, any creditor who does try to seize money during the automatic stay period could get into serious trouble by the court system if caught.
If a creditor feels that the stay in unjust for some reason and wants to avoid the stay entirely, then the creditor’s only option is to go back to court and make a case in front of the judge explaining why the company—or government organization, depending on who the creditor is—should be entitled to a seizure of assets while the bankruptcy case is ongoing. Bowser tells us that this is very rare though, and that it would be rare for a debtor who had hired a bankruptcy lawyer to see this happen in his or her case.
Despite how difficult it usually is for a creditor to attempt to seize money from a debtor’s bank accounts during a bankruptcy case, Bowser says that many of the clients he sees still bring this up as an area of concern. When a debtor does not have much money left in the bank—usually because he or she has spent so much of it trying to pay back mounting debts—the next area he will typically worry about is property.
Occasionally, clients who come to Bowser may have already had their properties in Mt. Clemens seized by creditors. “A lot of times that is it, because they don’t really realize what can be done and the creditors like to sneak around and do it when the debtor is not suspecting it,” he says. Calling a lawyer as soon as one starts to encounter financial troubles, however, can prevent this from happening.
When a property seizure occurs, debtors tend to get panicked and concerned, and rightly so. Even when a person thinks that he or she has lost everything though, Bowser says all is not necessarily lost. Even if the debtor has had his property seized and he can no longer afford to pay his rent or mortgage, there is still something that a bankruptcy attorney can do.
If a bankruptcy lawyer can get to the court quickly enough, then he or she can usually get the client his money back. When a client calls Bowser and asks him to get involved in the case, he can usually get into the court within 30 to 90 days and put a stop on the garnishment or seizure. It is important for people to understand that they can usually get back any property or money that was seized by creditors just as long as they find an attorney and file the right bankruptcy paperwork within 90 days from the date that the original garnishment occurred.
In fact, Bowser was recently able to get a client’s car back after it had been seized—all because the client responded quickly and got a qualified attorney like Bowser on the case. It just goes to show that rather than give up, those facing financial troubles are always better off getting help than sitting back and letting their assets get taken away.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
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