Can Creditors Freeze a Joint Checking Account Filing Chapter 7?

By Beverly Bird

Creditors are stripped of their power over you when you file for bankruptcy protection, but this doesn't necessarily mean that your assets aren't vulnerable in Chapter 7 proceedings. This type of bankruptcy allows the trustee to take your non-exempt property and sell it to pay your creditors. Holding an account jointly with someone else doesn't protect your share from being used to pay down your debts.

Creditors are stripped of their power over you when you file for bankruptcy protection, but this doesn't necessarily mean that your assets aren't vulnerable in Chapter 7 proceedings. This type of bankruptcy allows the trustee to take your non-exempt property and sell it to pay your creditors. Holding an account jointly with someone else doesn't protect your share from being used to pay down your debts.

The Automatic Stay

When you file for Chapter 7, an automatic stay goes into effect. Some exceptions exist – creditors have the right to petition the court to ask that the stay be lifted – but it typically begins as soon as you file and it remains in place until you receive your bankruptcy discharge. After you file, your creditors are prohibited from taking any action to collect from you, including freezing your checking account. This is true whether it's solely in your name, or if it's a joint asset that you hold with someone else.

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Liquidation Issues

Even if your creditors can't reach your joint account, your trustee may be able to. Technically, he can take half the money – your half – to pay your creditors. However, you get exemptions when you file for Chapter 7, which is property that you're allowed to keep. If you use an exemption to protect your half of the checking account, the trustee can't take it.

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How Long After Discharge Can a Trustee Take Assets?

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Disclosing Money for a Bankruptcy

In most cases, you can pick and choose what personal information you share with others. When you file for bankruptcy protection, however, the federal government wants to know everything there is to know about you, your assets, your income and your debts. No detail is too small, and you have a legal responsibility to be forthcoming. You're receiving a gift: the discharge of your debts. In exchange, you have to be honest about your ability to pay them.

What Will Constitute a Fraudulent Conveyance in Chapter 7 Bankruptcy?

The law doesn't allow you to pick and choose which property you’d really rather not give up for liquidation when you file for Chapter 7 bankruptcy. If you give away property – or even sell it for less than its value – because you want to keep the asset out of the proceedings, this is a fraudulent conveyance. You might even make the transfer with no intention of doing anything wrong, such as if you're trying to try to raise some cash so you won't have to file. If you end up in bankruptcy anyway, the transfer may be a crime.

Ways to Exempt Your Refund in a Bankruptcy

If you're contemplating bankruptcy, you probably have a thousand thoughts running through your mind. At the top of that list are probably concerns about your taxes and what happens once you file. If you are expecting a tax refund, you may be especially worried. Before you decide whether or not bankruptcy is for you, it may help to understand how your filing could affect your refund and what steps you can take to protect it in your effort to create a fresh financial start.

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