Bankruptcy and Savings Accounts in Arizona1h>
Having a healthy savings account can help you prepare for the unexpected. It’s one way Arizona residents can avoid filing for bankruptcy when financial hardships come their way.
If you’re considering filing for bankruptcy, you likely don’t have much of a savings account. People often exhaust their full bank accounts before turning to bankruptcy to help eliminate hard financial situations.
However, some people recognize that their monthly bills exceed their income long before they are in over their heads and missing those payments. They come to our legal office with some money in a savings account asking about filing for bankruptcy to consolidate their debt that has become too much for them to handle.
If you’re in this situation, it’s a good idea to discuss the matter with an Arizona bankruptcy attorney who can review your financial obligations and assets to recommend the best course of action based on your financial situation.
Arizona law on bank account balances and bankruptcy filings
Under federal bankruptcy laws, you can only have $300 in your bank account when you file for bankruptcy. Any additional funds that you have above that $300 are disposable income that you’ll have to use to pay off your debts.
While having more in your bank account won’t prohibit you from filing for bankruptcy, you should be aware that the court will use all funds above $300 to pay off your debts.
If you have more than that in your accounts and want to start the bankruptcy process, you can do so. The courts will look at the balance of your account on the day that you complete your bankruptcy filing.
You can strategically select when to file based on what time of the month your bank account is at its lowest after meeting your financial obligations.
What to do if your bank account never goes below $300 in an average month?
Pulling money out of your bank account to have as cash on hand to make your bank account artificially low before filing for bankruptcy is not legal. You cannot stash money away to hide to make your life more comfortable as you go through this process.
If you try something like this and get caught, you could be charged with fraud, which carries severe penalties including large fines and jail time. Trying to hide money could end up costing you a great deal more money.
What should I do with excess money in my savings account?
The best thing to do with excess money in your savings account before filing for bankruptcy is to use it on practical purchases. These purchases might include necessary car repairs, utility bills or finally getting the medical care you’ve put off because you didn’t have the money for it.
If you go on a shopping spree or spend the money frivolously, you could have a much harder road to filing for bankruptcy. The courts could deny your bankruptcy request. You don’t want this to happen as it means you’ll be left drowning in the debt you’re currently facing.
Before spending money, discuss the matter with an Arizona bankruptcy attorney who can explain allowable expenses as you prepare to file for bankruptcy. Documenting these expenses and saving receipts could help you prove that you did not spend savings frivolously leading up to your filing with the courts.
The courts will analyze all your account statements to look for poor use of financial resources. If they find poor use of financial resources, you’ll have to explain what those expenses were and why they were necessary at the time.
Contact our office to begin planning for your bankruptcy filing. We’ll guide you through understanding approved expenses and how to document your finances while undergoing a bankruptcy filing.