Banks to Avoid When Filing Bankruptcy

Wells Fargo graphics

Debtors who have decided to file for bankruptcy should plan ahead to be ready for the short term consequences that might result. For some debtors, pre-bankruptcy planning may include closing bank accounts and moving their money to a different financial institution.

Reasons to switch to a different bank or credit union include:

Avoiding having your bank account temporarily frozen. Some banks like Wells Fargo have a policy to place an administrative freeze on any account of a newly-filed Chapter 7 debtor with a balance exceeding $5,000. Other institutions like Union Bank are even more strict on this issue. One colleague told me about a case where Union Bank had frozen a debtor’s bank account that contained only $16. In theory, the banks are protecting assets of the bankruptcy estate. In reality, this type of bank policy creates a huge inconvenience to customers and does little to preserve bankruptcy estate assets.

Ending automatic withdrawals. Many debtors set up automatic withdrawals taken from their bank account to pay credit card bills. Even with the filing of a bankruptcy, there is not guarantee that automatic withdrawals will stop. It is easier to close a bank account than to get money back that a creditor improperly withdrew from your account.

Avoiding set offs. Sometimes debtors bank with an institution that has also issued credit cards to them or provided other forms of credit. It is not uncommon for a bank to claim money from a debtor’s bank account as a set off against other money owed by the debtor. Closing your account or keeping a low balance will minimize the risk of a claim of set off.

Debtors considering bankruptcy should avoid banking with Wells Fargo, Wachovia Union Bank and any financial institution to which the debtor owes money. If a creditor does improperly remove money from your account after your bankruptcy is filed, contact your attorney immediately.

Picture credit: MoneyBlogNewz

Carl Starrett

Carl Starrett is a consumer bankruptcy attorney in San Diego, California helping debtors file for protection under Chapter 13 and Chapter 7 of the Bankruptcy Code.

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  • Kimco

    It was in 2000, but I believe NFCU took all the money in my accounts towards my credit card which had been discharged. Even though my children have accounts with them still, they won’t let me even exercise parental responsibility over those minor accounts unless I pay back the remaining amount on that card from 11 years ago.

  • helena.richardson37

    The cost is only $4.99, about the same as you would spend for a large coffee and donut.
    georgia bankruptcy

  • Dr. No Love

    Wells Fargo recently froze my buisness because they said they needed more information on my application (for this account I’ve had for ten years); which I had opened with Wachovia on the advice of a Wachovia officer because the checking account would pay interest on the average 6 figures that was in the account. The account was called a cap account. It was a commercial checking account. After Wells Fargo purchased Wachovia, I continued to use the same account with Wells Fargo for the past couple of years. About two months ago I received a letter from Wells Fargo saying that they needed more information about me and my S – Corporation and if I didn’t respond my account would be frozen. The account number on the letter I had never seen so, I thought it might be fraud. I called the 800 number on the letter and after verifying, I was indeed talking to a Wells Fargo person. I told the individual I was deeply concerned about the letter because that 6 figure balance was the working capital for my business. I asked him about the account number I had never seen and he said it was a mistake and I was to ignore the letter. So I did. Two weeks later I was getting ready to leave for a vacation when I realized my account was indeed frozen because the 8,000.00 I transfered (payroll) to myself didn’t show up in my account? I went directly to the branch near my office and spoke to a young man who called himself an investiment advisor. There was no manager in the bank. I asked him why my account was frozen and he said he had seen an email about these accounts being frozen but really didn’t understand why. So I sat in his office from 1:30 in the afternoon until 6 PM, well after the bank had closed and after seeral calls he turned to me and said there was nothing he could do — they needed more information including a corporate resolution to free my account. The next day I couldn’t make payroll to my fellow doctors in my practice and, any outstanding checks would bounce. Payments from insurers that are deposited directly would be rejected including medicare, I have been in private practice for 30 years. I took out a $12,500.00 loan from Bank of Virginia in 1983 to start my practice. I never borrowed money from any bank for expansion since I started and we are a 6 doctor two office parctice with a sizable staff. I have an excellent reputation in the medical community. I served the governor of Virginia and the people of the commonwealth on my regulatory board. I give back and help open doors for others, offering internships, scolarships and residency programs, because I came from a working class family who’s parents didn’t finish high school; they had to work so they feed their brothers and sisters. It took me three days to free my account only because I told the Wells Fargo person on the line, “you’ll either hang up on me or give me your supervisor”. I finally got to someone who faxed me the four pages of info they wanted. It took an entire day for them to process mine (they moved me up because of my insistence) When in the branch, I actually talked on the phone with someone in the department handling the paperwork, and told him, “for the first time in 30 years I would not be able to pay our employees on time”. His response, “I have hundreds of people who won’t make payroll”! I want to say right now; Wells Fargo is the worse bank in America. I am leaving Wells Fargo and anyone who has an account with them should too! They called me today three weeks later to say they were sorry and they would take away any bank charges incurred. I feel sorry for the woman who called me. I told her this, Wells Fargo froze my account for no reason — ZERO— as a result, $20,000.00 from my Visa, Master Card auto deposits was missing, Master Card/Visa said it was transfered and Wells Fargo said it never got to them because they rejected any deposits, private insures and federal programs (medicare and tri-care)payments were rejected and missing; Tricare is medical insurance for active and retired military. I was unable to make payroll! One of my associate doctors had held her previous pay check from two weeks before and when she went to cash it at her bank (bank of America) they said it was no good and refused to give it back to her. All of our deposits were rejected because Wells Fargo changed the routing number on the checking account without informing me? It will take 4 to 6 weeks for the direct deposit insurers to start depositing again. ——- She wanted to know if there was anything she could do? It’s interesting —–all of my phone calls during this time were recorded by Wells Fargo and I’m ashamed to say I tossed several F-Bombs but this is what I found out along the way. Wells Fargo added an investement side to my checking account and assigned it an account number (the number I didn’t recognize in the letter). One of the officers I spoke to said the federal regulators had been on Well Fargo to provide more information in order to meet regulatory laws for these accounts and they were demanding they provide the information. She said all of this should have been done long ago but WF wasn’t getting it done so, someone at Wells Fargo thought they could quickly get the info for the feds by freezing the accounts. Is it not illegal for Wells Fargo to attach an investement account to my business checking without my signature? Is it not illegal for them to freeze my account after doing so? The problem here is that no one really cared? Truly, when I told them, “people who work in my office won’t be getting a paycheck and might not be going grocery shopping tomorrow”, They — did– not —- care? I have spent my life helping others. I see Wells Fargo as a cancer that is eating at America. In many cases, cancer must be removed —- it’s time to break up these big banks and deal with local people who, know us, live in the same communities, and share the same churches and schools. Wells Fargo is a big, fat, glutinous, rude, instution that should be investigated and taken down. I encourage anyone reading this to close your account or never open one. ——–( typed but not read or edited). (sorry for any spelling errors) Everything I’ve said was recorded by Wells Fargo, as I was informed after phone verification — our conversations were being recorded.
    Wells Fargo———-worst bank in America

  • Michael John Lake

    Wells Fargo lost over $300 by improperly harassing me for payment on a late account over a phone after the government had ordered I was at that time unable to manage my own money and appointed someone else. I told Wells Fargo to send me the paperwork so I could give it to the right people and have fair dept paid. Instead this instant loan division of Wells Fargo just kept calling me every day for a good part of a year until they finally gave up, or so it seemed. In fact I found out later that part of the company had been closed down but the money owed still being reported. So I was asked to take part in seeing the balance finally paid off but Wells Fargo could not provide any working phone numbers or address of anyone who was able to see the balance paid. So I am living not only with the experience of being harassed for a good part of a year by a company which did not listen but they are so screwed up that it is staying on my credit report because they gave a run around making it appear impossible to pay the balance. Greed appears to be the only thing you can trust by this company. If the United States ever had a breakdown in society I would expect the leadership of Well Fargo would need to fear for their lives for being held accountable like has happened in other nations during human history. Money and power are often the cause of delusion which bites these people in the ass. I certainly would not do anything now to work with or assist Well Fargo unless it was under court order that I could not fight or appeal, which I certainly would it had a chance of working.