Bankruptcy can be difficult and intimidating, but there are protections in place to help you get through it with your family and sanity intact. Filers can arrange to put some money aside to pay for necessities and in case of emergency. It’s intended to be left available to the filer during proceedings, and it can often be a source of normalcy and comfort in a stressful time.
Which makes it all the more crushing when the bank seizes that money, in any case.
Late last year, a small business owner in New York State who had filed for bankruptcy had a small amount of money seized by Wells Fargo, the nation’s fourth-largest bank. Having filed for bankruptcy, the filer has set aside around $7000 to pay for rent, groceries, and supplies for his family.
Wells Fargo seized this money, claiming that by doing so they were following regulations that required them to act according to the bankruptcy trustee’s direction, and seize all estate assets. The bank was not a creditor in the bankruptcy, and was instead following a company policy in regards to bankruptcy proceedings and assets.
The small business owner filed suit against Wells Fargo, claiming they had acted illegally. The judge overseeing the case decided in favor of the plaintiff, awarding a small amount of damages as well as court costs and legal fees. The judge also said that Wells Fargo acted inconsistently in regards to enforcing bankruptcy code, as the bank only seized amounts over $5,000.
While only a small amount of money was involved, the court’s decision, in this case, was important on a wider scale. This was the latest in a series of similar cases around the country where the bank had made similar seizures. The courts in this other cases had decided in favor of Wells Fargo. Their reversal, in this case, may mean the bank will have to act more cautiously in future.
Wells Fargo is appealing the court’s decision.