When you choose a bank to do business with, you’re likely to choose a bank with a name that you recognize. This makes sense since the bank you work with will ultimately be responsible for holding your money.
But some big banks don’t play by the rules when it comes to the bankruptcy code and the bankruptcy courts. While not the only bank to be singled out in court, a recent Wells Fargo court case points to a major problem with some of the larger (and more trusted) banks in the US.
A Struggling Story
During the Great Recession (not to be confused with the ‘Great Depression’) Rodney Wayne Weidenbenner of New York declared bankruptcy in order to relieve debts and keep his family afloat. Part of his bankruptcy deal included a ruling that allowed his family to keep $6,900 in his Wells Fargo bank account to pay for basic expenses. One morning, Weidenbenner woke up to find that the little money his family had to live on was gone. What happened?
As it turned out, Wells Fargo seized the funds citing bankruptcy law. Weidenbenner fought this decision in court and won. The judge found Wells Fargo liable for seizing funds that the bank had no right to touch. The bank has further argued (and intends to appeal the decision) that they were well within their bankruptcy law rights. As it turns out, the bank freezes funds in excess of $5000 in bankruptcy cases, though this practice may not necessarily be legal.
Not an Isolated Case
While the story above is a heart-pounding one (imagine waking up to a drained bank account!), this is not the first time that Wells Fargo and other large banks have acted in this manner. But it’s an issue that consumers should be well aware of. If you are going to store your money in a bank, take the time to find out what the bank’s policies are regarding bankruptcy, and whether or not the bank has veered from these policies in the past. This is an issue that your bankruptcy attorney should be discussing with you prior to filing your bankruptcy case.
It is unclear why Wells Fargo freezes some client funds following a bankruptcy decision, but the bank has won a number of similar cases in courts before. This is the first time that the bank did not win in a seizure case, and it may be a groundbreaking case for this bank (and others) to follow.
While the Weidenbenners did manage to recoup lawyer fees and other fees associated with the seizure of the family’s funds, this is a good lesson to consumers of all kinds. If more information were known about the tactics and policies of some of the larger banks in the US, most people would not choose to store funds in these banks.
Bankruptcy Is Tricky
It is not uncommon for a judge to allow a family to retain some funds when declaring bankruptcy, but this is a decision that has to be crafted and carried out by a skilled bankruptcy lawyer.
Further, if you are facing the possibility of bankruptcy and you do not have a lawyer that understands which banks are and aren’t to be trusted, you may wind up in a situation like the one mentioned above. This is why it’s best to call us today to help you with your bankruptcy procedure. You can reach us at (800) 391-4337 or schedule online.