After you file bankruptcy, if you have an account with Wells Fargo Bank, you may get a letter notifying you that your account is frozen. This can occur even if you do not have any debts with the bank. If you are considering filing bankruptcy and have an account with Wells Fargo Bank there are actions you need to take before and after you file.

Credit Unions and some Banks have always deducted funds from your accounts if you had debts with them. This is called a setoff, or enforcing their secured claim since credit union accounts are usually collateral for any debts owed to them. What makes this different is money is frozen, even if you owe the bank nothing.

Wells Fargo Bank appears to be the only bank doing this so far, but more banks are sure to follow. Right now, Wells Fargo is holding funds in excess of $5,000. They claim that when someone files bankruptcy, all property of the Debtor becomes property of the Bankruptcy Estate, and under the Bankruptcy Code, they have a duty to hold all funds until they get direction from the Bankruptcy Trustee or Court. While this is technically true, Debtors are allowed to exempt or keep property that may include part or all of their bank accounts.

The only way to get the funds released is to contact the Trustee assigned to the case and convince them to direct the Bank to release the funds, wait 30 days after your First Meeting of Creditors to see if the Trustee objects to your claim that the funds are exempt, or hope to get a Court Order releasing the funds, which may take a while.

All of these alternatives will not help when you need the funds right away to pay bills. The obvious solution right now is to move funds out of Wells Fargo Bank to another bank, and make no further deposits at Wells Fargo until after the Bankruptcy. Make sure you have no debts with the new bank or credit union, and hope they don’t follow Wells Fargo Bank’s lead.