I Can't Open a Bank Account After Bankruptcy...Now What?

From time to time, I encounter bankruptcy clients who have trouble opening bank accounts because they bounced checks due to insufficient funds. Banks and merchants often report bad check writers to database services. These services care consumer credit reporting agencies just like TransUnion, Equifax and Experian. The three largest reporting agencies for bad check writers are the Shared Check Authorization Network (SCAN), Telecheck and Chexsystems. Consumers with negative check information on their credit report will often find it difficult to write a check or even open a bank account.

I first encountered this problem in 2007 when a former client advised me that she was unable to open a bank account because of negative information reported by Chexsystems. I faxed a copy of the bankruptcy discharge order to Chexsystems and received a letter within a week confirming removal of the negative information from my client's credit report. She was then able to open a new bank account.

Companies like Chexsystems are subject to the Fair Credit Reporting Act. If a bad check debt is discharged in bankruptcy, the creditor has 30 days to report the debt as "zero balance, discharged in bankruptcy". My colleague Mike Doan has written an excellent article on the steps necessary to dispute negative information on Chexsystems and other bad check databases.

In my experience, however, an ounce of prevention is worth a pound of cure. For every new consumer bankruptcy case I file, I now include the major check verification services on the mailing list to receive notice of the bankruptcy. Many of my clients are unaware of any negative banking information on their credit reports. My clients often report to me that this approach has resulted in the automatic removal of negative information from their credit reports that they did not even know existed.

If you are in Southern California and are also encountering problems opening a bank account after bankruptcy, please contact us for a complimentary consultation.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Preparing For Your Meeting of Creditors

After a consumer debtor files for Chapter 7 bankruptcy, the court's computer will assign a hearing date for a Meeting of Creditors as required under Section 341 of the Bankruptcy Court. The trustee assigned to the debtor's case is responsible for reviewing the debtor's bankruptcy papers and selling off the debtor's non-exempt assets to pay creditors. Although most of these hearing are fairly routine, some of my clients become very anxious over what might happen to them at the hearing.

The Office of the United States Trustee has produced this helpful video that shows how a Meeting of Creditors usually works:

I advise my clients to review their bankruptcy petition again prior to the Meeting of Creditors. I also give my clients the following grounds rules, courtesy of my colleague Frederick Clement:

Be sure you understand the question before answering it. If there is anything about the question you don't understand, ask for clarification, instead of answering. But always be sure you understand the question you are being asked.

Never guess at an answer. You swear an oath to tell the truth and guessing isn't telling the truth. By guessing, you are not helping anybody understand what really happened. There are things witnesses know and things they think they know. "Know" generally means you learn it with one of your five senses. Otherwise you probably don't "know" it in the legal sense. So be sure not to guess.

Never volunteer information. The shortest truthful and complete answer is always the best. Where possible, truthful and complete, "yes" and "no" answers are best. If the clarification is required with a "yes" or "no" answer, make it very short. Volunteering information never helps you, it only hurts you.

Here are some of the common questions a trustee might ask at a Meeting of Creditors:

1. State your Name and Address for the Record
2. Did read your bankruptcy papers before you signed them?
3. Did you read and sign the meeting questionnaire?
4. Did you understand the questionnaire?
5. Did you list all your assets?
6. Did you list all you debts?
7. Did you list all your income?
8. Is there any reason to make any changes to your schedules?
9. Have you transferred any property or money to any family members in the last year?
10. Are there any creditors present?
    

The trustee might ask other specific questions that may be unique to your case. If your meeting is concluded, you will have no other obligations beyond completing the course in debtor education and any other instructions the trustee may give at the meeting.

And there is one final thing to remember: try to relax. The trustee is not a judge and knows that you are nervous just like the other debtors who also have to be there for a meeting of creditors. Your attorney will have the file and be able to assist you if any problems arise.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.