I just spoke with someone who came to see me 2 months ago. She has not yet file bankruptcy or a consumer proposal. As I always tell people who are in financial difficulty, do not bank where you owe. To her surprise (but not mine), the bank took money from her bank account to pay her arrears on her bank loan. I thought it worthwhile to re-post the article on why you need a new bank account.
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If someone has decided to file a bankruptcy or consumer proposal I insist that they bank with a financial institution they don’t owe money to and I explain why. I even give them a bright yellow sheet explaining how to do that and why it is important. However, every so often someone comes back to see and I find out they didn’t take my advice and move to a new bank.
Let me make this clear, if you bank at a bank where you owe money, there is a really good chance that they will freeze your bank account when they get the bankruptcy or consumer proposal papers. Your bank account is frozen and now your car payment and rent cheque will bounce.
Yes, I know you have been dealing with your bank a long time and they know you, but you have to consider what will happen if you don’t get a new bank account. They can take money out of your bank account if you are behind on your bill payments. Opps, that money was for your rent … sorry but the bank took the money to pay the visa bill, and yes they are allowed to do this. Now how do you pay your rent?
“But switching bank accounts is a lot of work”. I know it is, but you would rather have the bank freeze all of your money for days or weeks, or would you rather take an hour faxing your new bank account information to your employer, utility, insurance, car lender, etc.
“But my bank really likes me”. Then why did they turn you down for a loan?
“But all I have with them is a car loan and I am keeping my car”. Unfortunately, that doesn’t matter. Once your paperwork is entered into the bank’s computer, the freeze is automatic. They don’t have someone checking your file to see if they should be doing it.
“But I bank where my mortgage is.” You can bank where ever you want, you don’t have to bank where your mortgage is. You just have to tell your mortgagee to take the money from your new bank account.
“What if I don’t owe any money to the bank?” You may not need to get a new bank account. However, if you have written any post-dated cheques or have given pre-authorized payments on a debt that will be part of your proposal you will have to put stop payments on all of those payments. Putting stop payments on cheques can be expensive, you may find it cheaper to just get a new bank account. Talk to your bank about this.
To make it clear, don’t bank where you owe.
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