Should I open a new bank account prior to filing a bankruptcy or proposal?
While we always suggest you open a new bank account prior to filing a bankruptcy, or consumer proposal, there are really only three scenarios where it is necessary.
- If you owe money to the institutions you bank with. What can often happen is that the institution will try to directly seize any monies in the bank account and apply them to the outstanding loans. This is something that a bank is well within it’s rights to do in normal circumstances but one that is lost the day a proposal or bankruptcy is filed. The problem is there is an unavoidable delay between the time you sign the required documents and when they are received by the bank. If during this time the funds are seized, they will normally be returned by the bank but it can take up to 3 months for them to do so.
- If you have any creditors with direct payment privileges (i.e. instead of you having to physically pay a bill, they can take an automated withdrawal directly from you account). The problem that exists is it often takes a few months for your creditors to recognize the bankruptcy or proposal and to have the required information updated in all parts of their organization. The result is that often they will continue to take payments out of the account for a couple of months. Again these are monies that will normally be returned, but it takes time.
- If you have an overdraft on your account. The overdraft is a debt, and will be canceled and cleared in a bankruptcy. But, if you deposit monies into this account, it can make things difficult to trace and the bank can inadvertently end up taking funds they were entitled to without recognizing it.
As a result we always suggest it is always in your best interests to open a new account with an intuition you do not owe money to, prior to signing any documents with your trustee.
posted by Barton Goth GCO Bankruptcy Trustees @ 
