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Apr 2010

Before filing bankruptcy, get your money out of Wachovia

Posted by / in Weekly Posts / 15 comments

I just found out that when you file bankruptcy, Wachovia will freeze your accounts.  That’s even if you don’t owe them any money.

So if you are thinking of filing bankruptcy, get your money out of Wachovia.

This has been the policy of Wells Fargo for several years, but there weren’t any Wells Fargo Banks in Northern Virginia.   Wells Fargo took over Wachovia in the mortgage crisis and now they are freezing people’s accounts when they file bankruptcy in Virginia, too.

I see a lot of people in this part of Virginia who bank with them.  They base this policy on this court decision from Texas.  It doesn’t persuade me, but it persuades them.

So, if you are filing for bankruptcy, get your money out of  that account.  (And turn off the direct deposit if that’s where it’s going.)

PS   Roderick Martin, a bankruptcy lawyer in Georgia, just had one of his clients hit by Wachovia freezing his bank accounts.  He sent copies of the Wachovia letter to other lawyers around the country, as a warning, and looking for ideas on what to do.  Here’s Wachovia’s letter, dated May 2010.

PS  On June 30, 2010 an important court decision–from the 9th circuit bankruptcy appellate panel–told Wells Fargo they have to stop this.  I understand though that they have appealed.

PS  Bruce White, a bankruptcy lawyer in Richmond, shared this August 2011 letter from Wachovia, explaining that they still freeze people’s accounts.  Get your money out of Wachovia.  You can see the letter here.

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Robert Weed has helped fifteen thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.

  • Mark Muir

    May 5, 2010, pm31 9:23 PM

    This may not apply to everyone as the article implies. If Wells Fargo/Wachovia (“The Bank”) has not revised their policy since the 2005 court decision from Texas, then the policy in that court decision states:

    “The Bank has a policy ascertaining whether any individuals holding accounts at the Bank have filed for Chapter 7. Should the Bank learn of such bankruptcy filings, it places an “administrative freeze” on any account with a balance exceeding $5,000.00. The Bank takes this action so that debtors cannot withdraw the funds until the Chapter 7 trustee can assess whether the funds are exempt or nonexempt. The Bank wants to avoid drawing a suit from the trustee for allowing a debtor to use any funds belonging to the estate. The Bank does not freeze any account with less than $5,000.00 because it believes any balance below $5,000.00 is of inconsequential value or benefit to the Chapter 7 estate. The Bank also reviews deposits to determine if any funds in such accounts are derived from Social Security payments; the Bank does not freeze funds of this nature.”

    In majority of Chapter 7 filings, since the debtor has to qualify with the means test per the BAPCPA of 2005 (enacted after that court decision), it’s likely that most Chapter 7 filings since then are of the “no-asset” filing, which means that the debtor(s) do not have over $5,000 in their bank account(s) that they want to exempt (protect) in a bankruptcy anyway.

    In any case, it is prudent for a debtor to check in writing from their bank (any bank) on whether they will freeze your bank account “simply because you have filed a petition for Chapter 7 bankruptcy”. So this article does serve as a caution for everyone involved to make sure this does not happen to them.

    NOTE: I am not affiliated with any bank, and I’m actually a client of The Law Offices of Robert Weed, with whom have done a great job so far in handling my particular case.


    * MEM
    Mark E. Muir

  • Robert Weed

    May 8, 2010, pm31 3:38 PM

    This Wachovia/Wells Fargo problem got mentioned by one of the speakers last week at the National Association of Consumer Bankruptcy Attorneys meeting in San Francisco. About of third of the lawyers their started applauding in the middle of the sentence.

    Obviously many bankruptcy lawyers are really hacked off about this. Our national leadership is trying to figure out if they can do anything about it.

  • Salvador Lopez Barr

    July 7, 2010, pm31 2:46 PM

    This morning our Office was informed, that our Client’s bank account (from Wells Fargo Bank) has “frozen” her account due to her Chapter 7 Bankruptcy filing. I’m a little confused, because I would think that this is a direct violation of the automatic stay.

    Is there any recommendations as to how to “unfreeze” her account?

  • Carlos Rivera

    July 29, 2010, pm31 8:57 PM

    This only applied to Chapter 7, right?

    • Robert Weed

      July 29, 2010, pm31 8:58 PM

      Right, I think.

  • Marcio Takahashi

    October 14, 2010, pm31 2:34 PM

    My account just got frozen. To make matters worse, I was not able to stop the direct deposit for my paycheck, so now they got my paycheck. Also, my rent check just bounce because unsufficient funds.

    So at this time I only have $30 in cash with me to put gas and buy food for my kids. Wells Fargo/Wachovia thinks that they are helping, but they are making things worst.

  • Karina

    December 14, 2010, am31 9:32 AM

    I just found out that Wachovia froze my business checking account, because I filed chapter 11 bankruptcy. I’ve been reading a lot of articles and none of them mention Wachovia freezing accounts when you file chapter 11. All the articles I read so far are stating that Wachovia will freeze your account when you file chapter 7.
    This morning I called my attorney to let him know the situation, I just hope something can be done soon. I need to continue running my business.

    • Robert Weed

      December 14, 2010, pm31 4:24 PM

      I can see absolutely no justification for them freezing the account in an 11. If your lawyer is able to take them on, please let me know how it comes out.

  • mark perdue

    July 6, 2011, am31 7:49 AM

    Wachovia is still freezing assets. I am about to cite them for contempt. I am aware of the 9th circuit case, as well as the texas, new mexico, florida, and north carolina decisions. However, Wachovia is really extending itself over this policy.

    Let’s be honest. the reason they freeze accounts is not to be protected, as they are protected without knowledge. They do this to harass clients who file for bankruptcy. The easiest way to get them to stop is to have another big business entity join in the petition for sanctions.

    Again, I have a great case for this right now. The bank usually argues that the debtor does not have standing to sue, and only the Trustee has that right. My case is different, and I think the Trustee will join in my Motion for sanctions.

    However, to stop the practice, I will need to be joined by someone with a big business. Ford Credit, or any lender for vehicle loans would work. As well as some banks for mortgages.

    My theory to have big business join in.. which is not the factual scenario with my case, is that when Wachovia freezes teh account, the debtor is not able to make the monthly mortgage payment or car payment, which then forces those items into being surrendered, which hurts the other businesses which loaned the money for those items.
    Mark Perdue

  • mark perdue

    July 6, 2011, am31 7:53 AM

    In addition, the caselaw is very specific that Wells Fargo/Wachovia may only freeze the accounts in a Chapter 7. Not in a 13 or 11.

    And also, let’s be clear, the caselaw is a mixed bag. Wells Fargo/Wachovia has always won at the district level. It is the 9th Circuit which is the one that gives them the problem (and they won that at the district level).

  • Robert Weed

    September 12, 2011, pm30 12:46 PM

    Wachovia is now Wells Fargo. They have gotten faster at freezing these accounts.

  • Lynn Ward

    December 6, 2011, pm31 12:55 PM

    I have a question:
    I am filing Chapter 7 in North Carolina. I expect this to be in the hands of the Trustee within the next 24 hours.
    I have cancelled my direct-deposit of my paycheck and will be receiving a hard-copy check this Friday.
    If I deposit my paycheck in to my Wells Fargo account ‘after’ the Chapter 7 case has been submitted to the Trustee, would Wells Fargo also freeze the account after the filing?
    Thank you

    • Robert Weed

      December 6, 2011, pm31 12:57 PM

      Don’t know for sure. We are still getting used to dealing with Wells Fargo here on the East Coast. I certainly wouldn’t chance it. Open a new account somewhere.

  • j

    May 19, 2012, pm31 9:50 PM

    I am filing chapter 7 in Georgia. Do you know if Wells Fargo is still freezing accounts or not? Do they only freeze an account if it has more than $5000 in it.

    • Robert Weed

      May 20, 2012, am31 2:48 AM

      I don’t know–because I tell all my clients to get their money out of Wells Fargo.

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