If you’re considering filing for bankruptcy, there may be one aspect of this process you are hesitant about – your savings account. Unfortunately, many people are unaware of what will become of their savings during this process, which can lead to shock and confusion after they start their bankruptcy journey. As such, the following blog explores what you can expect if you want to file and why working with an experienced Orange County consumer bankruptcy lawyer is crucial during these matters.
Will My Savings Be Protected During NY Bankruptcy?
When you file for bankruptcy, it’s important to understand how assets are handled. Typically, they are either exempt or non-exempt, which determines whether or not they are taken and used to repay credits during the bankruptcy process. In Chapter 7 bankruptcy, a savings account is not exempt, meaning it can be seized and used to pay off debt you owe.
In Chapter 13, your account may not be seized by the trustee, but you may need to use funds held in the account to make your monthly payment.
During bankruptcy, you may be able to apply different exceptions to protect certain property. For example, in New York, you may use the wildcard exemption, which allows you to protect up to $2,500 worth of assets. You can use this toward your savings account if you so choose. If you do not use the homestead exemption to protect your property, this exemption can increase to $5,000.
Can I Just Transfer the Assets Out Of My Account?
If you want to file for bankruptcy and are worried about your savings account, you may wonder if it’s possible to transfer the assets out of your savings account and into the care of a trusted friend or family member for the duration of this process. Though it may seem foolproof, it’s vital to understand that this is considered fraud.
When you file for bankruptcy, you’ll find that the trustee assigned to your case will examine all transfers and prior transactions. As such, they will see that you moved all the funds from your savings, which indicates fraud. Your case will likely be dismissed, you will not receive a discharge, and you can face criminal charges.
As such, if planning on filing, using your savings to pay for bills and other necessities can help. Even though you cannot hide or conceal the funds, you may continue purchasing groceries, paying rent, and using the funds for other necessary purchases. You should not, however, use the money in your savings to pay off debts eligible for discharge. Additionally, using it to pay other debts could be seen as preferential treatment towards certain creditors, so abstaining from this is recommended.
Going through bankruptcy can be an incredibly complex matter. As such, it is in your best interest to discuss your legal options with an experienced attorney with the Law Offices of Michael D. Pinsky, P.C. Our firm understands the overwhelming nature of this process, which is why we are committed to providing you with the best possible legal advice for your circumstances. Contact us today to learn how we can assist you.
