Unexpected Benefits of Filing for Bankruptcy in Maryland
Filing for bankruptcy can be a powerful tool for those struggling with overwhelming debt, offering a path to financial relief and a fresh start. However, it’s natural to worry about how bankruptcy may affect your personal finances, including access to your bank account. In Maryland, what happens to your bank account after filing depends on several factors, including the type of bankruptcy you file, the contents of your account, and your specific bank’s policies. Here’s a detailed look at how filing for bankruptcy impacts your bank account and what steps you can take to protect your financial stability.
Answering the Question: What Happens to Your Bank Account When You File for Bankruptcy in Maryland?
What Happens to Your Bank Account in Bankruptcy?
When you file for bankruptcy, the court gains temporary control over your finances to assess your assets, liabilities, and eligibility for debt discharge or repayment. Here’s what generally happens to bank accounts in both Chapter 7 and Chapter 13 bankruptcies:
- Chapter 7 Bankruptcy: In a Chapter 7 bankruptcy, some assets are liquidated to repay creditors. While Maryland allows specific exemptions for bank accounts, these exemptions have limits, and any funds exceeding these limits could be at risk. For instance, cash on hand or in a checking or savings account may be subject to liquidation if it exceeds Maryland’s exemption cap, unless you can show it is protected, such as Social Security or disability benefits. However, if you have minimal funds, your bank account may remain untouched.
- Chapter 13 Bankruptcy: With Chapter 13 bankruptcy, you’ll work with the court to establish a repayment plan to pay back debts over three to five years. Since Chapter 13 allows you to retain most of your assets, your bank account is generally unaffected, and you can continue using it as usual. However, you must list all your assets, including bank account funds, to calculate an affordable repayment plan based on your total financial picture.
- Banks with Special Policies: Some banks may freeze your account once they learn you’ve filed for bankruptcy, particularly if you have outstanding debts or credit card accounts with them. For example, if you owe money to a bank that also holds your checking account, the bank might restrict access until the debt situation is clarified. In these cases, it’s often beneficial to open a new account at a different bank before filing, especially if you expect a bank to enforce its “right of setoff” (a policy where banks can apply account funds toward unpaid debts with them).
Protecting Your Bank Account During Bankruptcy
While bankruptcy laws are designed to provide debt relief, there are steps you can take to protect your bank account during the process:
- Understand Maryland’s Exemptions: Maryland law allows specific exemptions that may protect your bank account funds, such as a “wildcard” exemption up to a certain dollar amount that can be applied to your assets, including cash. Additionally, funds from Social Security, workers’ compensation, and other protected income sources are typically exempt from liquidation. Knowing these exemptions can help you determine which funds in your bank account are safe.
- Avoid Large Deposits Before Filing: Depositing a significant amount into your account before filing for bankruptcy may draw attention, as large sums could be interpreted as assets available to repay creditors. Avoid making any unusual or significant transactions before filing to ensure a smooth bankruptcy process.
- Consider Opening a New Bank Account: If your bank also holds some of your debts, opening a new bank account at an institution where you have no outstanding debt can prevent potential account freezes or “setoffs.” This is especially advisable if you have automatic payments linked to an account, as it reduces the risk of unexpected fund withdrawals after you file.
- Be Transparent with Your Attorney: Accurately report all your financial information to your bankruptcy attorney, including bank account balances and sources of income. This transparency will help your attorney determine the best way to protect your assets and navigate any risks unique to your financial situation.
Why Contact The Law Offices of Nicholas J. Del Pizzo for Help with Bankruptcy in Maryland
Navigating bankruptcy while protecting your bank account can be complex, but having experienced legal support can make all the difference. The Law Offices of Nicholas J. Del Pizzo in Baltimore provides comprehensive bankruptcy assistance tailored to Maryland residents, helping you make informed decisions and safeguard essential assets throughout the bankruptcy process.
Attorney Nicholas J. Del Pizzo has extensive experience in both Chapter 7 and Chapter 13 bankruptcies and understands the concerns Maryland residents face when filing for financial relief. Our team will walk you through each step, from identifying and applying exemptions to protecting your bank account and other assets, so you can achieve a stable financial future. We are here to answer all of your questions, evaluate your unique circumstances, and offer tailored solutions that best protect your financial stability.
Conclusion
Filing for bankruptcy doesn’t have to mean losing access to your bank account. By understanding Maryland’s bankruptcy laws, knowing how to protect exempt funds, and seeking experienced legal guidance, you can navigate bankruptcy with confidence and peace of mind. Contact the Law Offices of Nicholas J. Del Pizzo today for a free consultation, and let us help you understand your options and take steps toward financial relief and a secure future.