Account frozen for hiring attorney?

[chieffan123]

How can they do this?

I consulted with two nearby attorneys before chosing one. Made sure I had suffecient funds on hand in account to pay all outstanding checks to suppliers, employees, last payroll, and the 600 retainer for chapter 7. Paid the attorney retainer by debit card and before I can get back to town an hour later they have frozen my account and applied all money in the account to my sba loan there.

I realize this is small potatoes to what some of you are dealing with. Only 40,000 or so in debt. I have worked hard and honestly to never write a bad check. I have several very low income employees who depend on their small but hard earned income from my restaurant.

I left the attorneys office feeling much better this afternoon, until this. Now I cant talk to my attorney until Monday and feel sick about this situation.

By the way I have no credit card debt. No late taxes, current on sba loan and small signature loan with the same bank, only two weeks behind on food suppliers. Behind on the restaurant lease is my major issue causing bankruptcy. I even had a 6 month extension approved by sba to get through with them until April because of lean times.

How can they do this?

[kl030505]

We learned this lesson the hard way too. If you have a loan through the same bank you have a checking or savings account, when the loan becomes past due, they can demand the entire payment of the loan and since they have access to your checking account, they can rightfully take all of the money in it needed to repay the past due loan. If you lost the Money on Friday, they probably initiated the transaction on Wednesday or Thursday, so I doubt it has anything to do with getting the attorney. If you read the fine print in your checking account disclosure, it is there.

The same thing happened to us last year right before Christmas. We borrowed $5K from a relative in order to pay off the collection agencies who wouldn't work with the DMP. Everyone else agreed and we could actually afford the payment (though it was tight). EVen the bank of America loan had agreed to the DMP BEFORE they took the $ from our account, but they did it anyway and totally screwed us. Since we couldn't afford to pay off the people who wouldn't go to the debt managament plan we ended up having to do the Chapter 7m which in the long run is probably best anyway (probably should have done that last fall instead of the DMP.

I'm sorry. I know it sucks.

[SinkingFast]

It's called Cross Collateralization.

Probably somewhere in either your Checking acct paperwork, and/or your loan docs is a statement that allows the bank to debit your Checking acct if you're late in payment on the loan.

As KL said, it happens more than you know.

You'd be best off to open a Checking acct at another Bank or CU to conduct business from here on out. Otherwise, the bank you're currently with will keep hitting your Checking acct every time you deposit funds.

[chieffan123]

All loans are current. Had a long suprisingly civil discussion with the bank president. He told be flat out that the account was frozen because of the payment to a well known bankruptcy attorney.

If I had known this was going to happen I would not have made cash deposits the night before so I could have cash on hand to pay employees and the attorney.

[tinroofrusted]

All loans are current. Had a long suprisingly civil discussion with the bank president. He told be flat out that the account was frozen because of the payment to a well known bankruptcy attorney.

If I had known this was going to happen I would not have made cash deposits the night before so I could have cash on hand to pay employees and the attorney.

If this is the case, I am wondering how this is legal, or if it is a clear violation of privacy.

Technically you are able to pay anyone you want to. I don't see how a bank can jsut freeze funds because you made a payment to an attorney? There has to be some legal recourse for you, if they in fact, did this!

[SinkingFast]

If this is the case, I am wondering how this is legal, or if it is a clear violation of privacy.

Technically you are able to pay anyone you want to. I don't see how a bank can jsut freeze funds because you made a payment to an attorney? There has to be some legal recourse for you, if they in fact, did this!

Me too!

Just because the attny handles BK's,........... It doesn't mean they don't also practice other law as well.

Our attny only files a handful of BK's every month. Sometimes none in a month. I wondered how in the world he supported 2 paralegals, let alone his share of the partnership.

Our attny is a Creditor's Rights attny. That's his bread and butter business. BK is a side line. More than a few BK attnys practice Creditor's Rights law. Who better to know both sides of the aisle.

You coulda hired your guy to represent you in a legal action on behalf of your company. Not necessarily to file BK for you.

[qwertysue]

I'm not as familiar with 7s as I am with 13s.

Is preferential payment an issue with 7s? If it is, then wouldn't the bank be responsible for releasing the money above $600?

[emoney]

I believe you have a very good case against the bank. In fact you may become an owner.
Talk to your BK attorney fast.
regards,
emoney

[tinroofrusted]

Me too!

Just because the attny handles BK's,........... It doesn't mean they don't also practice other law as well.

Our attny only files a handful of BK's every month. Sometimes none in a month. I wondered how in the world he supported 2 paralegals, let alone his share of the partnership.

Our attny is a Creditor's Rights attny. That's his bread and butter business. BK is a side line. More than a few BK attnys practice Creditor's Rights law. Who better to know both sides of the aisle.

You coulda hired your guy to represent you in a legal action on behalf of your company. Not necessarily to file BK for you.

Agreed!

I would also look at trying to get the President to put something in writing to that effect. Sometimes hearsay is inadmissable in court. If you could get him to place it in writing that they froze your acct because of payment to an attorney, you probably wouldn't have to file BK when all was said and done!

[chieffan123]

Agreed!

I would also look at trying to get the President to put something in writing to that effect. Sometimes hearsay is inadmissable in court. If you could get him to place it in writing that they froze your acct because of payment to an attorney, you probably wouldn't have to file BK when all was said and done!

He threw out some legal terms (I can't remember to quote here) that he thought justified his actions. It had to do with his due dillegence to sba, that much I do remember.

I know nothing about banking laws with regard to privacy, but I know they watch my account like a hawk. Any time I schedule a visit (it's generally been a very cordial relationship) he always has copies of checks I've written that he wants to know more about. For instance a check written to Yellow Book USA. He thought it was not the correnct yellow book to be advertising in.

This meeting with the bank president was initiated because on following the advice of my attorney I was removing personal items from the restaurant that are likely/possibly exempt and or not collateral. I was also returning some small items the previous owner loaned me until I could purchase similar items on my own. A storage rack, decorations, etc.

My restaurant is directly across the street from the bank in a very small town. It was around 4:00 in the afternoon (broad daylight)and items were being removed through the front door. Not trying to hide anything.

Oh yeah, he also "heard" we were closing. I probably didn't help myself by being honest in the meeting and admiting I planed to file bankruptcy. But the conversation began with him telling me my account had already been frozen because of the 600 payment to this attorney. The attorney also practices criminal defense, divorce, and personal injury. But bankruptcy is his specialty. The banker even told me the attorney was a good choice and that he had attended a 341 meeting "across the table from hm" earlier in the week.

I don't want to own the bank if that is what emoney was refering to. I just want to have my employees paid and have no way of doing that with a frozen account. I have very little cash on hand to live on myself but can deal with that. Now if they have broken laws and I could sue them for enough to pay off my debts that would be like............

[chieffan123]

After visiting with the attorney today I have confirmed that this isn't legal. But he did it anyway. This isn't over with yet.