Can a Bankruptcy Filing Immediately Unfreeze a Bank Account?

Filing bankruptcy provides relief from debt and fees from collections, garnishments and levies. When financial obligations remain unpaid, creditors can seek a judgment against a borrower and attempt to collect debt by freezing his bank accounts. Filing bankruptcy removes the judgment freeze and releases the funds back to the a debtor.

Preparing for Bankruptcy

A debtor will need to contact an attorney to determine whether a bankruptcy will be the best venue. Bankruptcy does not remove certain judgments, such as alimony, child support and IRS judgments for past-due taxes. If a debtor does not qualify for Chapter 7 bankruptcy which discharges all debts, he will have to file Chapter 13 and negotiate repayment plans with creditors. If he doesn't know which creditor placed a freeze on his account, he will need to contact the bank to get this information.

Notifying Creditors

Once a debtor files bankruptcy, he will need to notify the creditors. He can contact them by phone or by mail. When mailing a notice, he may want to use registered mail to have a proof of delivery. When notifying by phone, he should write down the name of the person with whom he is speaking. This information may become important if a creditor continues collection procedures. Once creditors receive bankruptcy notices, they must stop all collection procedures against the debtor.

Attending a Court Hearing

A debtor must attend a court hearing. Creditors may attend the hearing as well if they object to bankruptcy. If a debtor is filing a Chapter 7, creditors usually do not object. Creditors may object to a repayment schedule when a debtor is filing Chapter 13. The court will approve the bankruptcy petition and issue an order of protection against any further collection attempts from creditors. The order also releases the judgment against the creditor.

Unfreezing Bank Accounts

Unfreezing bank accounts after filing bankruptcy is not immediate. Once the court issues a final order of protection, the debtor can take the documents to his bank and request a release of funds which may take several days. Once the bank's compliance department reviews the documents, verifies the bankruptcy filing and contacts the creditor who placed the judgment, it will release the funds to the debtor.