Chicago Bankruptcy Question: Can Chapter 13 un-freeze my bank account?

Chicago Bankruptcy Question of the Day: Can filing for Chapter 13 bankruptcy protection "un-freeze" my bank account?  Why yes, it can, so long as you act quickly. 

In the vast majority of these situations in the Chicago area, an individuals bank account is "frozen" because a creditor has gone to state court, obtained a judgment against the individual, caused a Citation to Discover Assets to be issued and placed a lien on the individual's bank account(s).  Once the bank receives notice of the lien, they are required to freeze twice the amount of the entered judgment.  They hold twice the amount to account for legal fees and costs incurred by the creditor in obtaining the judgment and lien, which must then be awarded by the state court.  Once the lien is fully satisfied, assuming there are sufficient funds to do so, the bank account is once again released.

Filing for Chapter 13 bankruptcy protection before the final entry of the order turning the funds over the to creditor will generally allow for the release of the lien and "un-freeze" the bank account.  When you file for Chapter 13 bankruptcy protection in the Chicago area, the federal court issues the automatic stay of bankruptcy, which is basically an injunction against your creditors requiring them to cease any and all collection activities.  Additionally, all of your property, including your bank accounts, become property of the bankruptcy estate and are thereby protected from creditor action. 

The timing of the Chapter 13 bankruptcy filing is essential here.  The case must be filed before the turnover order is entered by the state court.  If not, then the funds belong to the creditor at the time of filing and usually cannot be recovered.  The funds in the bank have to be listed in your Chapter 13 bankruptcy petition and exempted using your personal property exemption.  The lien must also be scheduled.  Notice must be given upon filing to the creditor, the creditor's attorney and the bank.  If notice is not proper, then the funds could be turned over to the creditor by the bank in good faith, making it very difficult to recover them. 

If your bank account has been frozen and you are considering filing for Chapter 13 bankruptcy protection in the Chicago area, then it is essential that you have the representation of an experienced Chicago bankruptcy attorney.  Speed and accuracy are essential in these situations, so you need a bankruptcy lawyer who has the resources to address your situation quickly and the skill to do so properly.  The Chicago bankruptcy attorneys at Ledford & Wu have handled thousands of Chapter 13 cases, have ten offices available for appointments, late night and weekend appointments and a staff of experienced lawyers to assist you in getting your case filed quickly and protecting your bank accounts.  Call today for a free consultation.

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