Can the Bank Freeze My Account After Bankruptcy?

Your bank cannot freeze your checking account after you file for bankruptcy, unless you are using the checking account fraudulently by writing bad checks or otherwise racking up excessive insufficient-funds charges. After you file for bankruptcy, the bank can close credit card accounts, but those are loans that will be resolved during the bankruptcy. The freezing of a checking account is much more damaging because it eliminates access to money that is rightfully yours, making it impossible for you to use your debit card, withdraw cash or write a check.

General Protection

Bankruptcy laws expressly prohibit creditors and debt collectors from attempting to collect from you after you file for bankruptcy. They are not allowed to take money from your bank accounts or freeze the accounts. One of the main features of bankruptcy is the protection it gives people trying to stop harassment from creditors or debt collectors.

The Automatic Stay

A special provision in bankruptcy is a legal injunction called an "automatic stay." The injunction forces banks to reopen accounts that have been frozen because of garnishment. Some people file for bankruptcy specifically because their accounts have been frozen. A federal judge signs the court order after you file, and copies are sent to all your creditors and your bank if your account has been frozen. Banks are required by law to comply with the order.

Garnishment

Garnishment and a freezing of your checking account begin after a debt lawsuit is filed against you. Creditors cannot ask a bank to freeze your bank account without a court order signed by a judge. A credit card company or other creditor that wins a lawsuit against you is awarded a legal decision called a judgment. The judgment requires you to pay a specific amount of money to the creditor. If you fail to respond, the creditor can ask the judge for permission to garnishee your bank account.

Avoiding Garnishment

Garnishment can be avoided without filing for bankruptcy by resolving debt lawsuits before they are heard in court. That can be accomplished by contacting the creditor directly and offering to settle the account. Settlements for less than the full balance are sometimes possible. On the other hand, if you are planning bankruptcy you should do so before creditors and debt collectors garnishee your bank account. It is possible to receive multiple garnishments from different creditors, with garnishment of your paycheck possible as well. Filing for bankruptcy sooner rather than later can keep you from having to make an emergency filing because of garnishment.