Preparation for filing bankruptcy should include getting your money out of Wells Fargo Bank.
Unless, of course, you’re willing to have Wells freeze your money for days or weeks, on its own initiative.
Wells says they are “helping” the bankruptcy trustee by denying you access to your money. Only the bankruptcy trustee didn’t ask for help.
The bank is, in that delicious phrase, an officious intermeddler.
Move it anywhere else, preferably to a bank where you have no recent history. But whip up your horses, and get it out of Wells Fargo.
Here’s the issue.
Exemptions protect assets in bankruptcy
While a Chapter 7 bankruptcy filing is a moment in time, capturing the assets of the filer and the existing claims of her creditors on the day a bankruptcy is filed, life is more like a flowing stream.
Life doesn’t pause when you file bankruptcy: you still have to eat, pay utilities, put gas in your car the day after your bankruptcy case, just as you did the day before you filed.
Exemptions allow you to keep some cash and other assets necessary for daily living as you enjoy your fresh start. If you’ve got significant money in the bank, you’ve undoubtedly claimed it exempt. Once allowed, exempt property becomes yours.
Wells, though, doesn’t inquire about your claims of exemption, or care an iota about the impact on your day to day living. It feels compelled to freeze bank accounts of debtors to preserve them for the bankruptcy trustee.
The freeze keeps you from ATM access; your checks bounce; and automatic bill-pay is frustrated.
Experience says the funds will be released, once the debtor discovers the problem, informs the trustee, and gets a letter from the trustee requesting the release of the funds.
Legal challenge to account freeze rejected
Erik Mwangi filed an adversary proceeding against Wells Fargo for violation of the automatic stay when Wells froze his bank accounts after his bankruptcy case was filed.
His suit claimed that the bank improperly took possession or control of his account, without having obtained the permission of the bankruptcy judge.
The case wove its way through the courts til the 9th Circuit decided that the debtors had no interest in the funds until the exemptions became final, and thus they had no cause to complain.
So, Wells gets a pass to freeze your money.
Vote with your feet
This bank behavior seems, at the moment to be confined to Wells Fargo and to Chapter 7 bankruptcy cases.
You can avoid this further complication to your life by removing your funds from Wells Fargo before you file bankruptcy. (I wouldn’t complain if everyone took their money out of Wells, but that’s a different campaign!)
Open an account with another bank, or better yet, a credit union.
Credit unions are owned by their members and generally understand customer service.
Wells Fargo could take a lesson from credit unions.
Image: © Photobank
