Why You Should Close Your Old Bank Account & Open a New One When Going Bankrupt
After you’ve filed for bankruptcy, there’s a critical question you need to consider: Should you open a new bank account? If you’re trying to navigate the financial aftermath of bankruptcy, this article will guide you through the process.
Why Consider Opening a New Bank Account?
Filing for bankruptcy in Canada removes your unsecured debts, which means your creditors are legally barred from continuing to claim payments from you. However, the reality of the situation can be much more complex.
Note: Your creditors may not instantly be aware of your bankruptcy status. This could lead to continued collection attempts for a certain period after the bankruptcy filing.
The process of informing creditors can take up to five days. Factoring in mailing times and the time it takes creditors to process the information, you could still be receiving collection calls two or three weeks after filing for bankruptcy.
The Risk of Automatic Payments
Automatic payments linked to your bank account for debts included in your bankruptcy could continue for a month or more. This is because creditors might not immediately be aware of your bankruptcy filing.
Tip: To ensure no unauthorized payments are deducted from your account, consider opening a new bank account before filing for bankruptcy.
Choosing a New Bank
It’s important to open your new account at a bank where you don’t owe any money. This way, you can avoid any potential complications with your bankruptcy filing.
Canadian law stipulates that a bank cannot refuse to open a new account for you (except in cases of suspected criminal activity). This means you should have no issues opening a new account.
Timing Matters
The optimal time to open a new bank account is before you file for bankruptcy. This approach ensures that only authorized payments will be deducted from your account after the bankruptcy filing.
Updating Your Payment Information
Remember to inform any relevant parties of your new account details. This includes your employer’s payroll department, any sources of income such as child tax benefits or pensions, and any direct payments you plan to continue (like utilities or car insurance).
By taking these steps, you can confidently navigate the financial landscape after filing for bankruptcy, knowing that only authorized payments will be deducted from your account.
Concluding Thoughts
Bankruptcy is a complex process, and managing your finances afterward requires careful planning. While opening a new bank account may seem like a small step, it can be a significant one in ensuring your financial stability during this challenging time.
Always remember, the goal is to regain your financial footing as quickly as possible. And sometimes, starting fresh with a new bank account can be the first step in the right direction.
