Filing for bankruptcy can be an incredibly overwhelming and complicated process. One of the main concerns those debating filing have is what will happen to their savings account if they choose to file. The following blog explores what you should know about these matters, including ways you may be able to protect your savings, and the importance of working with a Memphis, TN consumer bankruptcy lawyer.
How Does Bankruptcy Impact a Savings Account?
Understandably, many people are concerned about what will happen to their savings account in the event they file for bankruptcy. Generally, you should note that you likely won’t lose the account. However, the funds held in the account will likely be used to repay debts owed to creditors.
When you file for Chapter 7, which is the process in which the trustee assigned to your case will liquidate the assets to repay creditors, the money held in your savings account can be seized. If you file Chapter 13, you may need to use funds from your savings to make the monthly payment to creditors.
Can I Just Transfer the Money Out of the Account?
Unfortunately, many people assume the easiest way to protect their savings account is to transfer all the funds out of the account before filing. While this may seem straightforward, unfortunately, this is fraud. Any attempt to hide or conceal assets and funds from your trustee or the bankruptcy court can result in the dismissal of your case, losing the discharge, and up to 20 years in prison. The bankruptcy court will review your transactions to ensure all your assets are accounted for, and if it suspects fraud, you can anticipate serious consequences.
Instead, one of the best ways to protect the money in your savings account is to utilize the money to pay for your living expenses. Though making extravagant and luxury purchases shortly before filing for bankruptcy can be considered fraud, spending on necessary living expenses is expected. As such, you should use your savings to purchase groceries, pay for medical care, make rent payments, and pay your utilities. It’s important to only pay bills that are due currently and avoid attempting to pay any debts that could be erased in bankruptcy.
You can also protect up to $10,000 of any personal property if you utilize Tennessee’s wildcard exemption. This can be used to exempt any personal property, but you may use it to keep a portion of your savings account if you so choose.
As you can see, bankruptcy can be complicated to navigate. That is why it’s critical to discuss your circumstances with an experienced attorney. At the Arnold Law Firm, our team understands the complexities of these matters, which is why we are ready to assist you during these difficult matters. Connect with us to learn more.
