Many clients have been concerned with whether they are able to keep funds in an institution to which they owe other debts. For example, a client may have a savings account with ABC Bank, and also have their car loan, mortgage, and/or credit cards with ABC Bank.
So long as the client continues to remain current on any debts or obligations to ABC Bank, there should be no problem. However, if the client stops making some of the payments, ABC Bank may have a right to set off (or offset) the debts owed to them with the funds from the savings account until the bankruptcy is filed. Once the bankruptcy is filed, any new funds added to the account should not be used as an offset by the bank.
Accordingly, if a client intends to stop making payments to ABC Bank for any reason, client should also zero out the savings and/or checking account.
It may be a good idea to leave the account open, and use the account after the bankruptcy is filed, as longevity at a financial institution is one factor considered in evaluating a person’s credit.
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