If you’ve ever found yourself staring at a frozen bank account and the looming threat of bankruptcy, you know the panic that sets in. Your mind races with thoughts of unpaid bills and empty cupboards. It’s a devastating blow that can leave you reeling. But I’m here to tell you that countless others have faced this same situation and made it through to the other side. You can too.

I want to share with you exactly what happens to your bank account when you file for bankruptcy and the steps you can take to protect your money. Because believe me, I know how crucial it is to hang onto every penny when you’re in this situation. Ready? Let’s dive in and get you the information you need to navigate this challenging time with a little more peace of mind.

What Happens to Your Bank Account When You File Bankruptcy?

Filing for bankruptcy is a big decision. It’s not just about getting rid of debt, but also understanding how it will impact every aspect of your financial life – including your bank accounts.

How Bankruptcy Affects Your Checking and Savings Accounts

Here’s the deal: when you file for bankruptcy, the court assigns a bankruptcy trustee to your case. Their job is to review your assets, including your checking and savings account balances, as of the date you filed. Any amount in your accounts over your state’s exemption limit (more on that later) is fair game for the trustee to take to pay your creditors. Even if you have outstanding checks or charges that haven’t hit your account yet.

What Is an Automatic Stay?

When you file bankruptcy, an automatic stay goes into effect. This is a legal protection that stops most creditors from continuing their collection efforts against you. But here’s the kicker – the automatic stay does NOT prevent certain financial transactions from happening, like your bank freezing your accounts. Yep, they can still do that even after you file.

Understanding Bankruptcy Exemptions

Now, each state has its own set of bankruptcy exemptions that let you protect certain assets up to a specific dollar amount. The problem? Very few states have exemptions that cover the money in your bank account. So, if you live in a state with a wildcard exemption, you may be able to apply some or all of it to your bank account funds. But if not, that money is at risk of being taken by the trustee to pay your creditors.

How to Protect Your Bank Account Funds During Bankruptcy

Okay, so now that you know your bank account is at risk in bankruptcy, what can you do about it? Here are a few strategies to protect your money:

Choosing the Right Bankruptcy Exemptions

This is where a good bankruptcy attorney comes in clutch. They can help you use your state’s exemptions strategically to protect the maximum amount of your assets, including your bank account funds. For example, let’s say you live in a state with a $5,000 wildcard exemption. You could apply that to your bank account to safeguard that amount from the trustee. Every dollar counts, right?

Working with a Bankruptcy Attorney

I can’t stress this enough – having an experienced bankruptcy attorney on your side can make all the difference in protecting your bank account and other assets. They know the ins and outs of the bankruptcy code and can use that knowledge to your advantage. They can also communicate with the trustee on your behalf to get any account freezes lifted ASAP so you can access your money.

Using a Wildcard Exemption

If your state has a wildcard exemption, you may be able to use some or all of it to protect your bank account funds. These exemptions let you apply a certain dollar amount to any asset of your choosing. So if you have $3,000 in your checking account and a $5,000 wildcard exemption, you could apply $3,000 of that exemption to your bank account. That money would then be safe from the trustee.

Steps to Take with Your Bank Accounts Before Filing Bankruptcy

If you’re considering bankruptcy, there are a few key things you should do with your bank accounts beforehand to minimize any potential issues:

Separating Exempt Funds from Non-Exempt Funds

Remember those exemptions we talked about? Well, some types of funds are automatically exempt from creditors, like Social Security benefits. If you have exempt funds mixed in with non-exempt funds in your bank account, do yourself a favor and separate them BEFORE filing. Put the exempt money in one account and the non-exempt money in another. This will make it crystal clear to the trustee which funds are protected. The last thing you want is your exempt money being frozen or taken by mistake.

Notifying Your Bank of Your Bankruptcy Filing

Some banks will automatically freeze your accounts when they find out you’ve filed for bankruptcy. To avoid this, give your bank a heads up about your filing and provide them with your case information. You may also need to provide documentation showing that the funds in your account are exempt or covered by an exemption. Your bankruptcy attorney can help you navigate this process and get your accounts unfrozen if needed.

Paying Essential Bills Before Filing

Before you file, make sure to pay any crucial bills like rent, utilities, and food. You want to avoid any large or luxury purchases, but definitely take care of your basic living expenses. Paying your essential bills before filing can help ensure you have access to the funds you need for your day-to-day expenses. The goal is to minimize any disruption to your life during the bankruptcy process.

Keeping Your Bank Account Open During Bankruptcy

A lot of people worry that they’ll lose their bank account entirely when they file for bankruptcy. The good news? You can usually keep your account open, with a few caveats:

Maintaining a Checking Account for Regular Transactions

In a Chapter 7 bankruptcy, you’re allowed to keep a checking account for your normal, necessary living expenses and transactions. If your bank freezes your account, you may need to open a new one at a different bank. The key is to be upfront with your new bank about your bankruptcy and make sure you’re not opening an account at a bank where you have any unpaid debts or loans. Your bankruptcy attorney can advise you on the best course of action.

Avoiding Fraudulent Transfers or Preferential Payments

Be very careful about any unusual account activity in the months leading up to your bankruptcy filing. Certain transactions, like large cash withdrawals or transfers to family members, could be seen as fraudulent transfers or preferential payments by the bankruptcy trustee. Stick to your normal spending patterns and avoid any major financial moves that could be viewed as suspicious. When in doubt, run it by your attorney first.

Communicating with Your Bank

Keep the lines of communication open with your bank before, during, and after your bankruptcy case. If your account gets frozen, work with your attorney and the trustee to get it released by providing proof of your exempt funds. Stay on top of any bank notices or requests related to your bankruptcy case. If the bank has questions or concerns, address them promptly. Being responsive and transparent can go a long way in preventing or resolving any issues with your account.

What to Do If Your Bank Account Is Frozen Due to Bankruptcy

So, worst case scenario, your bank account gets frozen after you file for bankruptcy. First, don’t panic. It happens, and there are steps you can take to regain access to your money: Contact your bankruptcy attorney or trustee immediately and let them know what’s going on. Provide them with any notices or information you’ve received from the bank. Gather documentation showing that the funds in your account are exempt, such as proof that the money came from Social Security benefits, disability payments, or other protected sources. Your attorney can help you with this. Your attorney or trustee will then reach out to the bank on your behalf to get the freeze lifted. They’ll provide the necessary documentation and court orders to prove that the funds are exempt and should be released. 

Keep in mind that it may take some time to get your account unfrozen, especially if your trustee is backed up with other cases. In the meantime, make sure you have access to cash or other funds to cover your essential living expenses. If the bank is unresponsive or refuses to release your exempt funds, your attorney can file a motion with the court to compel them to do so. It’s important to act quickly, as you don’t want to be without access to your money for an extended period. Once your account is unfrozen, consider keeping detailed records of your account activity going forward. This can help you quickly address any future issues or questions from the bank or trustee. Remember, the key is to stay calm, communicate with your attorney, and provide any requested documentation promptly. By being proactive and informed, you can minimize the impact of a frozen bank account and get back to focusing on your fresh financial start.

Key Takeaway: 

Filing for bankruptcy impacts your financial life, especially your bank accounts. Your account can be frozen and funds over exemption limits taken by trustees. To protect yourself, work with a savvy attorney to strategically use exemptions and separate exempt from non-exempt funds before filing. Stay calm if your account freezes; quickly provide proof of exempt funds to get it unfrozen.


Dealing with frozen bank accounts and bankruptcy is never easy, but armed with the right knowledge, you can take steps to protect your funds and keep your account open. Remember to choose the right bankruptcy exemptions, work closely with your attorney, and communicate proactively with your bank.

If your account does get frozen, don’t panic. Provide documentation of exempt funds to your trustee or attorney, and they can help get the freeze lifted. And most importantly, know that you will get through this. Bankruptcy isn’t the end of the road – it’s a chance to start fresh and rebuild your financial future.