If you have built a good relationship with your current bank or credit union you may be concerned about how your bankruptcy will affect your ability to continue with them. You may wish to maintain your bank accounts because you feel that you have built a good long term relationship in which they have assisted you with loans or credit at needed times. Whether you will be able to continue to maintain your bank accounts with your current bank or credit union will depend on a number of factors. If you owe that credit union or bank money there are some items you need to consider prior to continuing with your bank:
WILL MY BANK/CREDIT UNION ALLOW ME TO CONTINUE TO BANK WITH THEM AFTER FILING BANKRUPTCY?
If you do not owe your current bank/credit union any money then you should be able to continue to bank with them. Most banks and credit unions will not close your bank account simply because you have filed for bankruptcy. On the other hand if there is a debt owed to your current bank/credit union then you may not be able to maintain your banking privileges or bank accounts with them.
DEBT OWED TO CREDIT UNION
Credit unions have requirements for maintaining membership with them. Most credit unions require that you do not cause them a financial loss in order to maintain your membership with them. When you file for bankruptcy and list a credit card or loan from your credit union, this will be treated as a financial loss that you have caused them.
The credit union will generally send you a notice informing you that as a result of the financial loss you cannot maintain your membership with the credit union. The majority of credit unions maintain this policy.
If you agree to pay back the debt to the credit union through signing a reaffirmation then the credit union will allow you to continue to be a member. In most circumstances signing a reaffirmation on a debt in order to keep your banking relationship is not a good option.
You may be wondering if you can simply avoid listing the debts you owe to them in your bankruptcy. In a bankruptcy you are required to list all of your creditors. (Learn why you are required to list all debts in a bankruptcy). You cannot select which debts you choose to file bankruptcy on.
DEBT OWED TO REGULAR BANKS
If your bank is not a credit union then listing their debts in a bankruptcy will not result in the bank refusing to open a bank account or maintaining your current banking relationship with you. Banks such as Bank of America, Chase, Citibank, Union Bank, Wells Fargo and US Bank have not refused to continue to maintain a person’s bank accounts simply because they have filed for bankruptcy on a debt owed to them.
Before deciding to keep your bank accounts with your current bank it is important that you talk to a bankruptcy attorney who can advise you of the benefits and risks involved.
SHOULD I CONTINUE TO MAINTAIN MY ACCOUNTS WITH MY CURRENT BANK?
If you owe the bank/credit union, money on credit cards or loans it is generally advisable not to place your money in bank accounts with them before or after filing for bankruptcy. There is a potential risk that the money may be subject to the right of set off. The right of set off allows some banks or credit unions to take money from your bank account to pay off debt that is owed to them on loans or credit. Continuing to place your money in bank accounts where you owe money to them runs the risk that the bank will utilize the right of set-off and leave you with no money in your bank account.
Whether you bank can exercise the right of set-off depends on a number of factors that are specific to every state. It is better to exercise precaution and avoid maintaining your accounts with any bank in which there is a debt owed. After filing for bankruptcy the right of set-off may still apply in limited circumstances. Your bank will have to get court permission to exercise the right of set-off.