Can I Keep My Bank Account When Filing Bankruptcy?

In most cases, yes — you can keep your bank account open during and after bankruptcy. However, there are important considerations about your account balance, the bank itself, and the timing of any pending deposits or payments.

Your Bank Account Is an Asset

When you file bankruptcy, all your property — including money in bank accounts — becomes part of the bankruptcy estate. The balance in your account on your filing date is reported on Schedule A/B and is subject to the trustee's review.

Whether that money is protected depends on exemptions:

• If your bank balance is small (a few hundred dollars), it's typically protected under your state's cash or miscellaneous property exemption, or it falls within the trustee's cost-of-sale threshold and isn't worth pursuing.
• If your balance is significant, it may exceed your available exemptions and the trustee could claim the excess.

Practical tip: Many filers time their filing strategically — after paying normal monthly bills and when bank balances are at their lowest. Don't drain accounts through unusual transfers to family or friends shortly before filing, as this could be viewed as a fraudulent transfer.

The "Right of Setoff" Problem

Here's a critical bank account issue: If you owe money to the same bank where you have a deposit account, the bank may have the right to "offset" (take) funds from your account to satisfy your debt.

For example, if you have a credit card with Chase and also have a Chase checking account, Chase may seize your checking funds when you file bankruptcy to apply toward the credit card balance. This right of setoff exists in many loan and account agreements.

Solution: If you owe money to the bank that holds your primary checking account, open a new checking account at a different financial institution before filing — ideally a credit union or a bank where you have no outstanding debts. Transfer direct deposits and automated payments to the new account before filing.

Garnishment Freeze After Filing

If a creditor had already obtained a wage garnishment or bank levy against you before you filed, the automatic stay stops it immediately upon filing. If funds were frozen in your account but not yet disbursed to the creditor, you may be able to recover those funds if they fall within your exemptions.

Bankruptcy and Bank Relationships

Banks generally don't close accounts simply because you filed bankruptcy. However:

• Some banks may close the account if you discharge debt owed to them
• Banks may require you to open a fresh account after bankruptcy
• Credit unions that also hold your debt may have similar concerns

If you bank primarily at a credit union where you also have a loan, consider opening a checking account at a separate institution before filing.

Protected Types of Funds

Even if your account balance exceeds exemptions, certain types of funds are protected by law regardless of account balance:

• Social Security benefits: Fully exempt — protected even in a bank account
• Veterans' benefits: Federally protected
• Disability benefits: Generally protected under state law

These protections don't disappear just because the money is deposited in a bank account, but keeping such funds in a clearly identifiable account (or noting their source in your schedules) helps document their protected nature.

Next Steps

Easy-Case walks you through listing all bank accounts on your schedules and claiming the appropriate exemptions. Learn about exempt property or understand the automatic stay's protections to better prepare for filing.