Georgia Bankruptcy Filers of Chapter 7 or Chapter 13 Subject to Bank Account Taking

If you file Chapter 7 or Chapter 13 bankruptcy in Georgia, your bank account may be frozen if you have debt with that bank. Normally, creditors are not allowed to take payment or money from debtors who filed bankruptcy. However, pursuant to 11 U.S.C. Section 553 of the bankruptcy code, a bank has the right to “set-off” debt that you owe to it with funds that you keep in any account with the same bank.

In practical terms, this means that they can remove the funds from your personal account in order to pay your debt to them, regardless of whether or not you authorize them to do so. Normally, in a bankruptcy, the debtor’s assets are protected by a an automatic bankruptcy stay that goes into effect upon filing. The right of set-off is a legal exception to the stay therefore the bank’s action does not violate the stay.

So how can you protect your assets if you file? I recommend that clients who have credit cards or loans with the bank where they have their personal accounts set up a second account at a neutral bank before they file for bankruptcy. They can then transfer their money to the new account and keep no money in the bank where they also have a loan or credit cards. Automatic deposits, such as salary or paycheck deposits, should be transferred to the new bank as well. This legally removes the client’s assets from the reach of the bank.

As you can see, there are many considerations involved in the decision to file for bankruptcy. If you are making this decision please consult a qualified attorney. For a free consultation please contact The Law Offices of Charles Clapp at 404.585.0040 or email at