Should You Open a New Bank Account After Filing Bankruptcy?

Category: Personal Bankruptcy (6) comments

The best advice we can give is that you should open a new bank account BEFORE filing bankruptcy or a consumer proposal rather than waiting to open an account until after you file. We suggest you do this for your own protection.

Filing bankruptcy in Canada eliminates your unsecured debts, so your creditors are not permitted to continue to take payments from you. However, filing bankruptcy on Monday at 10:00 am does not mean your creditors are aware of your filing at 10:01 am on Monday and therefore immediately stop all collection action.

Your trustee has five days to notify your creditors, so if your bankruptcy documents are mailed on Day #5, and if it takes five more days for the package to be delivered in the mail to your creditors, and if the creditor doesn’t get to the package for a few more days it can easily be two or three weeks before collection calls stop.

If you have automatic payments set up in your bank account (for your credit card, bank loan, or any other debt included in your bankruptcy) it is very possible that those automatic payments will continue for another month or more before they are stopped.

So how can you guarantee that no unauthorized payments are taken from your bank account after you file bankruptcy?

Open a new bank account, at a new bank where you don’t owe any money, BEFORE you file bankruptcy.

bank account and bankruptcyUnder Canadian law a bank cannot refuse to open a new bank account for you (unless they suspect criminal activity) so you should have no problem opening a new bank account.

Contact the payroll department at your employer and have them switch your paycheque to your new account. If you receive other income from child tax benefits or pensions, notify them of your new account as well. If there are direct payments that you will be continuing to make (such as your hydro bill or car insurance), switch those to your new account too.

By opening a new bank account before filing bankruptcy you can be confident in the knowledge that only payments you have authorized will be taken from your new bank account.

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  1. Crystal s

    If I owe money to a bank say bank fees. And I went Bankrupt. After I am discharge can I go back to the same bank and open another account. Or will they say You still us money for that account

    1. J. Douglas Hoyes

      There is nothing to prevent you from going back to your “old” bank after your bankruptcy is finished and opening a new account. Whatever you owe prior to your bankruptcy is discharged (eliminated) when you are discharged from bankruptcy. To protect yourself, it is important that you open a new bank account at a new bank when you go bankrupt, and stop using the old account. (If the old account is overdrawn, the bank will eventually close it when they are informed of your bankruptcy). You may find that after banking at a new bank for a year there is no need to return to your old bank.

  2. Molly

    I’m currently in bankruptcy. If I open a second bank account in a different bank do l have to tell my trustee?

    1. J. Douglas Hoyes

      Hi Molly. You are required to report your income to your trustee, but there is no specific requirement to advise your trustee of where you bank. In most bankruptcies, to save the hassle of you having to write a cheque to the trustee each month, they will typically set you up on a pre-authorized payment plan, so in that case it would be in your best interests to advise the trustee of a bank account if that’s where you want your payments to be taken from.

  3. Kevin

    Can I file bankruptcy if I am not working? I will be leaving Alberta and moving back to Ontario and filing there. I have funds available to sustain us until we find new jobs back home. We will be opening new bank accounts as soon as we are back in Ontario for car insurance and other bills. Or would you suggest opening new accounts in Alberta first before we leave? And after filing can I get a credit card to start building credit after I file?

    1. J. Douglas Hoyes

      Hi Kevin. Yes, you can file bankruptcy if you are not working. If you are moving back to Ontario, you should open a new bank account once you get to Ontario. Yes, you can begin to rebuild your credit after you file; your licensed insolvency trustee can explain that process to you in more detail when you meet.


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