Bankruptcy and Your Bank Account
Once the chapter 7 bankruptcy has been filed with the Bankruptcy Court, the Chapter 7 trustee assigned to the case is in charge of all assets. Some would say that the chapter 7 trustee owns the assets, including bank accounts.
But…just because the Chapter 7 bankruptcy trustee “owns” the asset or the bank account, doesn't mean that he or she will “liquidate” the asset.
If the asset is exempt or not worth the time and effort to liquidate, the bankruptcy trustee will leave it alone. In Arizona, only $150.00 is exempt per person in one bank account on the date of the filing of the petition. If $151.00 or more is in the account on that day, in theory… the chapter 7 bankruptcy trustee could take the extra amount above the exemption. If the amount in the account is $1500.00 on the date of filing, than the bankruptcy trustee will be very interested in the account balance above the exemption amount.
The fact that the chapter 7 trustee “owns” the asset, doesn't mean that you will need to close the account prior to filing. The account can remain open and money earned after filing the case can be deposited, and is not property of the bankruptcy estate.
In a chapter 13 bankruptcy case, the filer remains in control of the assets and can use the account in most cases without worrying very much about the amount in the account on the date of filing depending on how much creditors are being paid through the plan.
If the filer has a bank account with a credit union like Desert Schools Federal Credit Union, they must be more careful about the account. If the filer has a car loan or other loan with the credit union, the bank account funds are probably acting as partial collateral on the loan. When the bankruptcy is filed the credit union will likely freeze the account and try to offset the funds in the account against the balance owed on the loan. In order to prevent this, many bankruptcy filers will close the account prior to filing or limit the amount in the account. Sometimes, non credit union banks will take a similar position.