Should I Switch Banks Before Filing for Bankruptcy?

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Switching banks before filing for bankruptcy may complicate your situation in Canada. You need to disclose all financial accounts, and recent changes might attract scrutiny. If your current bank is a creditor, moving funds is wise, but ensure the new bank isn’t connected to your creditors. Always consult your trustee for guidance.

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Question

Should I switch banks before filing for bankruptcy? I’m considering changing banks and need to know if it’s a good idea before I file for bankruptcy.

From: Anonymous, British Columbia (BC)

Answer

Switching banks before filing for bankruptcy may not be the most prudent move, as it could raise red flags and complicate the process. In Canada, when you file for bankruptcy, you need to reveal all financial institutions where you have accounts, and any recent changes to your accounts could be closely examined by the trustee. If your current bank is also a creditor, transferring your funds to a different bank could protect your money from being seized to settle debts. Just make sure your new bank isn’t connected with your creditors to avoid extra issues.

It’s also essential to keep a checking account to handle your day-to-day expenses after filing. Setting up a new bank account ahead of time can offer some peace of mind. Always be upfront with your trustee about any account changes to comply with bankruptcy regulations. Ultimately, consulting with a licensed insolvency trustee can help you navigate these decisions, ensuring you’re well-equipped to make informed choices for your financial future.

From: Insider Scott

OSB Based Answer

Switching banks before filing for bankruptcy can be a strategic decision, but it’s important to consider a few factors. According to the Bankruptcy and Insolvency Act (RSC 1985, c 11), creditors can claim funds in your bank account before your bankruptcy is filed or during bankruptcy proceedings.

If you change banks, ensure that the new bank will not be a creditor in your bankruptcy case. Otherwise, your assets could still be subject to claims. Review section 67 of the Bankruptcy and Insolvency Act, which addresses the property exempt from seizure.

Be cautious of transferring significant assets to your new bank prior to filing. This could be viewed as a preference for one creditor over another or possibly lead to allegations of fraudulent conveyance under section 95 of the Bankruptcy and Insolvency Act.

If you choose to switch banks, discuss your plans with a licensed insolvency trustee to ensure compliance with the law and to protect your assets effectively.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

References

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