Bank Accounts in Bankruptcy
When you file for bankruptcy, your trustee will seize your assets and pass them on to your creditors to settle a portion of the debt, but does a bankruptcy trustee seize your bank account?
Many people worry about losing control over their bank account during the bankruptcy process, but that will not happen.
Although the funds in your bank account are considered assets that can be recovered by the trustee, they will not simply take control of your bank account and seize all of your funds.
In most cases, there are other considerations that need to be made and some of your funds will be exempt.
This article will tell you everything that you need to know about your bank account during the bankruptcy process.
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Exemptions For Expenses
When you file for bankruptcy, your trustee will allow you to keep money in your account for your living expenses.
If you only have a small amount of money in your bank account from a recent paycheque and you have demonstrated that this money is set aside for living expenses, the trustee will leave it alone.
The trustee will look at the total amount in your bank account and then take away any important expenses, before claiming the rest of the funds.
For example, if you have $1,500 in your bank account but your rent is $1000 and you have utility bills that cost $200, you are not really considered to have $1,500.
Instead, you will be considered to have $300 and that is what the trustee will recover, so you are still able to meet your other financial obligations.
The amount that is considered reasonable to keep depends on where you are and what your personal circ*mstances are.
Usually, the trustee considers the amount that you need for expenses over the next few weeks.
Any expenses that fall after your next payday will not be considered.
The exemption limits vary in different provinces, so it’s important that you know the law in your area.
What Isn’t Exempt?
When people ask, does a bankruptcy trustee seize your bank account, they are often most worried about their savings.
If you retain a balance in your account to cover you in the event of an emergency, this is not usually considered exempt because it is not needed for an immediate living expense.
Any money that you have in a savings account that exceeds the exemption limits is also at risk.
However, RRSPs are considered exempt, apart from the contributions that have been made in the last year.
If you have concerns about exactly how much will be taken from your account, you need to speak with your trustee.
They will be able to give you a clear figure, so you can plan your finances accordingly.
Hopefully, this should have answered all of the main questions that you have.
If you would like more information about the different exemption limits, or more general information about bankruptcy and other debt relief options, get in touch today.
You can reach us on the phone or fill out an evaluation form and we will get back to you.
