5 Tips to Prevent Having Your Bank Account Scooped

by Angela Marquis on October 28, 2015

bankIf you have an account with a bank in which you owe a loan or a credit card, that bank can go into your account and withdraw the payment to fulfill the debt. This process is called the “Right of Offset”. They can do this without notifying you ahead of time and if you are unaware that they have done this it may cause a cheque returned “NSF” or leave you short to pay other bills and living expenses. You should consider opening a bank account where you have no debt (including a mortgage or car loan).

However, before going bankrupt or filing a consumer proposal, we strongly recommend you open a new bank account so you won’t be banking where you owe. Once you file for bankruptcy or make a consumer proposal the bank you owe may freeze your account, which means you won’t have access to any of your money, including direct deposits and paycheques! The Trustee handling your file will then send the bank a document to unfreeze your accounts creditors and to cease all collection activity, but it could take your bank weeks to process it. In the mean time you won’t have access to your account.

Therefore, protect your income by changing bank accounts before signing papers with your trustee.
The following 5 steps will help you with opening your new bank account:

1 If you are in overdraft, you will not be able to close your old account but the overdraft will be included in your bankruptcy or consumer proposal. However, if you are not in overdraft then close the account at the bank where you owe.

2 You will need to change you income to your new account immediately. This includes all sources of income, such as your paycheque, child tax credits, and HST refunds.

3 Only give your new account number to your creditors for mortgage or car payments you will be continuing to pay.
4 Change any pre-authorized payments for things such as utilities, rent and insurance payments to your new account immediately.

5 You will need to stop any payments, pre-authorized or other types, to your old account.

After all this you may be saying to yourself “I like my current bank, been dealing with them for years and I don’t want to change my direct deposits and pre-authorized payments with another bank which will be a lot of work”. You also may be feeling hesitant about banking with a bank you have never dealt with.

Yes, it is a bit of work, but what’s worse: spending an hour to re-direct everything to your new bank account, or having your old bank account cleaned out because you didn’t open a new one, and missing your rent payment and not having any money for food?

Opening a new bank account at a new bank is great protection for you, so I strongly recommend it.

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