Wells Fargo is Freezing ALL accounts for Chapter 7 Debtors

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July 7, 2010 This has been an ongoing problem with Wells Fargo. When one of their banking customers files for bankruptcy, they slap a freeze on the customer’s savings accounts – they claim because they have a duty to preserve assets of the estate.

Wells Fargo had taken out $5,700 in which my account was zero out. I was told they sent the money to Wells Fargo Attorneys. Wells Fargo had kept garnishing my account after knowing I filed Chapter 7. I had child support deposted into my account in which Wells Fargo had garnished as well of a bank fees that brought my account negitive.

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This is a questionable practice and is currently used only by Wells Fargo Bank, Union Bank and its subsidiaries. The freezing of the account was allowed by the court in In re Young, 2010 WL 3965698 (Bankr. M.D. Fla. 2010) and is permitted by the bankruptcy courts in the Orlando, Florida area (Middle District of Florida).

This means the bank has the right to reach into your checking, savings or other accounts held by the same bank, and use those funds to pay the debt owed to them. Therefore, if you bank with Wells Fargo, and also have a Wells Fargo credit card, you should take steps to make sure the funds are not frozen when you file for Chapter 7 bankruptcy.

While it is unclear whether or not other banks will follow Wells Fargo’s "freezing approach," the Bankruptcy Appellate Panel for the ninth circuit decided in 2010 that Wells Fargo violated the automatic stay when it froze the bank account of a debtor who had filed for Chapter 7. However, other circuits may interpret the issue differently.

Instead, it placed a hold on a tangible amount of money in Debtors’ bank accounts. As Ms. Tafoya’s testimony at the evidentiary hearing demonstrates, Wells Fargo, by itself, made the determination to only place a freeze on accounts of $5,000 or more. The freezing of deposit accounts was not mandated by the Bankruptcy Code, ordered by the Court, or requested by the chapter 7 trustee. wells fargo simply decided to place a freeze on property of the estate and unilaterally determined who was.

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