I did not file BK & Wells Fargo Froze ALL of my FUNDS! PLEASE HELP!

[randian]

Will Wells Fargo freeze your account even if you don't owe them any money?

[helpme2010]

I have a checking account with Chase who bought up my last bank WM. I also owed a lot of money on my Chase Visa card. So I asked my lawyer if they could freeze my checking account or deduct the money and he said no. Maybe because its chase or maybe because I am in California?

Either way just to be safe, I say keep enough money to pay your bills with and move the rest to another bank if you are scared. Or open up another bank account with another bank. If you are afraid of this, take cash to a place like Walmart and pay your bills with cashiers checks. I think it's around 50 cents or so to get a cashiers check. It's a pain, but it may help you if you have no checking account.

[helpme2010]

I would think a good BK attorney could contact your bank and threaten them if immediate action isn't taken. This is one reason why I recommend everyone hire a really good bk attorney. The bank probably has no fear of you, but would be scared to mess with your attorney.

[despritfreya]

I am reposting this from another thread from today. Unlike some of you savy forum users I have no clue how to contect the link. Sorry for the repost and its length. It does confirm an earlier post in this thread that had a link to the BAP decision discussed below.

__________________________

I routinely advised my clients to get their $$ out of Wells Fargo before filing bk. I did this as Wells Fargo had a national policy to freeze accounts once the bk hit. I believed Wells Fargo was taking the law into its own hands and was wrong. In June, 2010 the 9th Circuit Bankruptcy Appellate Panel (BAP) handed down a decision which ratified my beliefs. It is/was improper for Wells Fargo to exercise control over the funds and you should seek sanctions against it. For your reference below are excerpts from the BAP decision. Again, this is a long post but well worth the effort to read as Wells Fargo got its hand slapped. OP, California is in the 9th Circuit therefore this ruling is binding upon Wells Fargo. The exception would be if the Debtor owes money to Wells Fargo. If she does then Wells Fargo had the right of offset and you will have to prove those funds belong to you to get them back. But read on:

__________________________

In re Mwangi (Case No. NV-09-1408, 9th Cir. BAP June 30, 2010) (This decision was ordered to be published but I do not have the official cite.)

As part of its standard, national procedures, each night Wells Fargo Bank, N.A. (“Wells Fargo”) runs a computerized comparison of all newly filed Chapter 7 bankruptcy cases against its list of account holders. Upon discovering that Appellants had filed a chapter 7 petition, Wells Fargo “froze” Appellants’ accounts and sent a letter to the chapter 7 trustee, seeking instructions as to disbursement of the funds. No directions were forthcoming from the trustee. The debtors, claiming 75%of the funds in the accounts exempt, demanded that Wells Fargo release funds to them. When Wells Fargo refused, Appellants sought sanctions for willful violation of the automatic stay. The bankruptcy court held that the exempt funds in the accounts were not property of the bankruptcy estate. As a consequence, it determined that Wells Fargo’s failure to release the funds did not constitute a violation of the automatic stay where the record did not establish that Wells Fargo was attempting to “collect, assess or recover” a prepetition claim it had against Appellants.

We REVERSE and REMAND for further proceedings.

The bankruptcy court’s ruling was premised on its holding that exempt property never becomes property of the bankruptcy estate but remains at all times a debtor’s property. Accordingly, the bankruptcy court determined that no provision of § 362(a) covering property of the estate protected the account funds claimed exempt. . . Finally, the bankruptcy court determined that because Wells Fargo took no action to “collect, assess or recover” a prepetition claim it had against Appellants, it did not violate the automatic stay.

Despite the suggestions from Wells Fargo to the contrary, and the determinations of some other courts that have considered Wells Fargo’s national policy, the Supreme Court’s decision in Strumpf (which dealt with a creditor’s right to setoff), although instructive, does not authorize the type of administrative freeze on bank accounts imposed by Wells Fargo in the dispute before us. . .

Notwithstanding the limited holding in Strumpf, one bankruptcy court has stated broadly:

“The Supreme Court has held that an administrative freeze on an account, which is a promise to pay, does not violate § 362(a)(3) because the freeze constitutes neither a taking of property from the debtor nor an exercise of dominion over the debtor’s property. (In re Calvin), 329 B.R. 589, 603 (Bankr. S.D. Tex. 2005).”

We believe the Calvin court overlook the context and limited application intended by the Supreme Court in its decision in Strumpf. Significantly, Wells Fargo concedes that the account funds are property of the estate (and it was not exercising any right to setoff). . . In fact, Wells Fargo represents that its national policy is not motivated by any right to protect setoff rights generally. . .

Because Wells Fargo is not attempting to protect setoff rights, the “exception” to turnover of funds in a deposit account recognized by Strumpf does not apply in this case.

Wells Fargo does not dispute that under its national policy it routinely holds, and in this case held, property of the estate which is subject to the turnover provisions of § 542(b). It is undisputed that Wells Fargo did not turn over the account funds to the trustee. However, Wells Fargo asserts that § 542(b) only “obligated [it] to pay [the account funds] . . . to the trustee or his order.” In light of the absence of the Strumpf setoff issue, we might expect Wells Fargo to address what other “exception” might apply to the requirement that Wells Fargo immediately turn over the account funds. But here, Wells Fargo appears to assert that no “exception” is required. It contends that its “administrative pledge” in this case, when coupled with its letter to the trustee seeking instructions, complies with the turnover provisions of § 542(b), because it stood willing and able to pay the funds to the trustee “on his order.” The trustee did not request turnover of the account funds. End of story, says Wells Fargo. What happened to the funds was up to the trustee, and therefore out of Wells Fargo’s control.

In this regard, however, Wells Fargo fails to recognize that turnover issues are not coextensive with issues relating to application of the automatic stay. As we pointed out in the Abrams decision, “the failure to return property of the estate with knowledge of the bankruptcy is a violation of both the automatic stay and of the turnover requirements of the Bankruptcy Code. See also In re Carlsen, 63 B.R. 706, 711 (Bankr. C.D. Cal. 1986). For that reason, we believe it is irrelevant whether Wells Fargo’s national policy of holding the account funds until requested by the trustee to release them might have been in technical compliance with § 542(b). . .

Section 362(a)(3) expressly prohibits “any act . . . to exercise control over property of the estate.” Wells Fargo asserts it did not exercise control over property of the estate. We disagree. Wells Fargo could have paid the account funds to the trustee; it did not. Wells Fargo could have released the account funds claimed exempt to the Appellants when demand was made; it did not. Wells Fargo could have sought direction from the bankruptcy court, by way of a motion for relief from stay or otherwise, regarding the account funds; it did not. Instead, it chose to hold the funds until a demand was made for payment that it alone deemed appropriate. If that is not “exercising control over” the funds, we don’t know what is.

The impact of Wells Fargo’s national policy is to turn on its head the balance between rights of parties legislatively created. As a result of the policy, every party, except Wells Fargo, whose rights are impacted by the administrative freeze will need to take action.

When Wells Fargo took no action after receiving no instructions from the trustee as to how to disburse the account funds, which were indisputably estate property, Wells Fargo “exercised control” over those funds, and it violated the automatic stay. On remand, the bankruptcy court should determine whether Wells Fargo’s continuation of the administrative freeze and retention of the account funds claimed exempt, in the absence of instructions from the trustee, was reasonable in light of the Appellants’ demand that the subject account funds be released for their use. If the bankruptcy court determines that Wells Fargo’s conduct entailed a willful violation of the stay under § 362(a), then the bankruptcy court will need to determine what, if any, damages the Appellants are entitled to under § 362(k)(1). We leave those determinations to the bankruptcy court.

______________________

Des.

[Bell30656]

I think you will need to see an attorney. Having her on the account may make that money partially hers regardless of who put it in the account.

[WhatMoney]

I am reposting this from another thread from today. Unlike some of you savy forum users I have no clue how to contect the link. Sorry for the repost and its length. It does confirm an earlier post in this thread that had a link to the BAP decision discussed below.
Des.

This is the problem when someone violates the terms of service and posts the same question in five different threads. The MAIN thread that should be used for robertr1784's problem is below. Please try to keep all replies in one thread:

http://www.bkforum.com/showthread.ph...!-PLEASE-HELP!

I hope the moderators will help clear up this mess made by the multiple postings.

[WhatMoney]

In re Mwangi (Case No. NV-09-1408, 9th Cir. BAP June 30, 2010) (This decision was ordered to be published but I do not have the official cite.)

I found the published decision here:

http://caveatemptorblog.com/wp-conte...Fargo-Bank.pdf

There is a little more to the case than your summary. Also the appeals court did not sanction WF or order the frozen funds to be released. They simply threw it back to the BK court to reconsider the disposition of the funds as determined by another hearing. As far as I can tell, the funds are still frozen by WF, one year after WF bank froze the funds. There is no follow-up on what the trustee finally decided.

The comments by the appeals court in this case may help the debtor get the funds released in a court case. But obviously since this administrative freeze just happened, the 9th circuit ruling has not changed Well Fargo's policy at all.

The shortest route to getting the money released is to get the trustee to mail or email WF with a release order. This may not be that easy now. A longtime girlfriend files Ch. 7 BK, and fails to include a joint bank account with her name as an owner, that contains "lots of money". That is what the trustee will discover. He/she may decide that is the estate's money, and order WF to move it to the estate. The girlfriend will need to at least file an amended schedule B to include the account, and an amended schedule C to claim the funds are exempt because they are not hers - and be able to prove it with bank statements and deposits. Since it was a joint account, the girlfriend must have copies of the bank statements. And the question arises - did this longtime girlfriend ever use any of the funds in this joint account? After all, she could have withdrawn all of them with a single check. I hope the trustee is understanding...

[tcreegan]

Hi robertr,

The key thing I see in your posts is the word "joint" before accts, now I know that word has a different meaning in California, but as far as the BK is concered, half (at least) of those accts belong to the BK estate. If her name is on the acct, it doesn't matter where the funds came from, doesn't matter who she owes money to, any acct w/ her name on it is a cash asset that the BK trustee can go after to distribute among her creditors. I can think of 3 options:

1) Go to Wells Fargo and beg/plead to have the acct unfrozen b/c you are not in the BK and have rights to access the acct.

2) Get documentation together that shows all the deposits into the acct. came from you. Send it to the BK trustee and say you just forgot to take her name off the acct.

3) Start a new acct somewhere else and start over.

I don't know any LA attorneys but I imagine they don't come cheap, is the value of the accts more than an attorney retainer?

Personally, I favor option #1.....

Good luck with this,

Tom in Colo

[despritfreya]

There is a little more to the case than your summary. Also the appeals court did not sanction WF or order the frozen funds to be released. They simply threw it back to the BK court to reconsider the disposition of the funds as determined by another hearing. As far as I can tell, the funds are still frozen by WF, one year after WF bank froze the funds. There is no follow-up on what the trustee finally decided....

Yes the decision was reversed and remanded as indicated and there is a bit more. Way too much to post. Actually, over the past few months there have been numerous status hearings. Wells Fargo has filed a Notice of Appeal to the 9th Cir. Court of Appeals and the BAP denied a Stay Pending Appeal. In as much as Wells Fargo is spending tens of thousands of dollars in the Mwangi matter, I cannot imagine that it wants to face an OSC in OP's situation especially, if the debtor has had no contact with the account in a long time.

The comments by the appeals court in this case may help the debtor get the funds released in a court case. But obviously since this administrative freeze just happened, the 9th circuit ruling has not changed Well Fargo's policy at all.

True, this is why Wells Fargo needs to be taken to task. It is thumbing its nose at the BAP.

Des.

[WhatMoney]

Yes the decision was reversed and remanded as indicated and there is a bit more. Way too much to post. Actually, over the past few months there have been numerous status hearings. Wells Fargo has filed a Notice of Appeal to the 9th Cir. Court of Appeals and the BAP denied a Stay Pending Appeal. In as much as Wells Fargo is spending tens of thousands of dollars in the Mwangi matter, I cannot imagine that it wants to face an OSC in OP's situation especially, if the debtor has had no contact with the account in a long time.

Hard to say, WF has an army of attorneys to protect the bank's profits and policies. I think WF would rather litigate to exhaustion, knowing they have unlimited pockets and the appellants do not.

True, this is why Wells Fargo needs to be taken to task. It is thumbing its nose at the BAP.

If the case is now in the 9th Circuit Court of Appeals, it is business as usual for WF. And it can take the 9th CCoA one to two years to make a ruling - they are a notoriously slow district. So WF's policy is still legal as far as the bank is concerned, and will be for a long time. If WF loses the Appeal, they will just go to the SCOTUS and hope the business friendly 4-3 majority will rule in their favor. Then it's the law of the land that any bank can freeze BK accounts at will.

I would aim for a closer target and not be a martyr. It will be interesting to see what the trustee's action will be. I hope this thread doesn't just die with no resolution like so many do here.

[WhatMoney]

5-4 majority, not 4-3. stupid time limitation on edits.

[AngelinaCat]

Hello All:

I have merged five different threads/posts and their responses into this one thread. At least I think I found them all. So if some of the continuity is 'off', that is why.

A warning has been sent to Robert about posting a myriad of duplicate posts--essentially spamming the boards, and where to find the forum rules. I wish to thank you for your patience in your responses, and gentle chiding to this newbie.

Happy Thanksgiving!

[despritfreya]

Hard to say, WF has an army of attorneys to protect the bank's profits and policies. I think WF would rather litigate to exhaustion, knowing they have unlimited pockets and the appellants do not.

True, but it appears that the Debtor's attorney is willing to deal with it. Some of us do take cases to the max just to make law and/or a point.

If the case is now in the 9th Circuit Court of Appeals, it is business as usual for WF. And it can take the 9th CCoA one to two years to make a ruling - they are a notoriously slow district. So WF's policy is still legal as far as the bank is concerned, and will be for a long time. If WF loses the Appeal, they will just go to the SCOTUS and hope the business friendly 4-3 majority will rule in their favor. Then it's the law of the land that any bank can freeze BK accounts at will..

Not true. The BAP ruling is the "law of the land" in the 9th Cir. unless and until the 9th Cir. CA reverses the ruling. Remember, the Stay Pending Appeal (which only applied in the pending case) was denied. Also, as to the Supremes, I can tell you from experience, and based upon the issues, win or lose, Debtor's counsel will be contacted by an attny back east about handling an appeal without an expectation of payment. Happened in a case my firm appealed 2x to the CA, winning one and losing one. The losing one went to the Supremes and was reversed. The client didn't pay a dime to the east coast attny.

So, martyr or not the Mwangi case is the law and will continue make history (at least in the 9th Cir.) and the OP should go after the bank for the now willful misconduct.

Des.

[WhatMoney]

Not true. The BAP ruling is the "law of the land" in the 9th Cir. unless and until the 9th Cir. CA reverses the ruling. Remember, the Stay Pending Appeal (which only applied in the pending case) was denied.

So, martyr or not the Mwangi case is the law and will continue make history (at least in the 9th Cir.) and the OP should go after the bank for the now willful misconduct.

So you saying the automatic Stay upon BK filing prevents a bank from any administrative freeze on the debtor accounts? The BK court rejected that argument because the WF funds were not part of the estate, and the BAP reversed and remanded that decision.

What the BAP said was WF controlled the estate funds when they refused to release the claimed exempt funds, after the Trustee refused to order the release. It seems WF can still freeze BK funds as long as they do not hold them after the Trustee releases them, and after waiting 30 days if the Trustee does not respond, as in the Mwangi case, they cannot continue to hold exempted funds, and must release them either to the debtor or the Trustee. It was the lack of action WF took after the Trustee did not respond to the freeze that the BAP ruling was most critical of.

I would also like to see what arguments WF will make in their 9th Circuit Court of Appeals. That may explain why they still feel they are free to put administrative freezes on BK accounts.

[WhatMoney]

I've found another review of the Mwangi case that makes the issue clearer, at least to me. But I can see why WF is appealing, since 9th Ckt BAP seems to be alone in their ruling:

Ninth Circuit BAP Finds Wells Fargo Freeze Policy Violates Automatic Stay
07/22/2010 10:33:00 AM EST

Breaking with judges in Texas and New Mexico, the Ninth Circuit Bankruptcy Appellate Panel has found that an administrative freeze policy utilized by Wells Fargo Bank violates the automatic stay. No. 09-1408, Mwangi v. Wells Fargo Bank, N.A. (Ninth Cir. BAP 6/30/10). The opinion can be found here.(PACER access required).

Wells Fargo's Policy

Every night, Wells Fargo compares cases filed in CM/ECF against its account holders. If one of its account holders files chapter 7 bankruptcy, Wells Fargo places an administrative freeze upon the account and sends a letter to the chapter 7 trustee requesting instructions on disposition of the funds. In the Mwangi case, the debtors initially disclosed that they had only $1,300.00 in their Wells Fargo accounts. After Wells Fargo froze the accounts, they amended their schedules to disclose $17,075.06 and claimed 75% of this amount as exempt. The Debtors then demanded that Wells Fargo release the funds based upon their claim of exemption. When Wells Fargo refused, the Debtors filed a motion for sanctions. By the date of the hearing, the exemption had become final. The Bankruptcy Court ruled that Wells Fargo had not violated the stay because the funds were property of the estate and that Wells Fargo had not attempted to collect a debt.

The BAP Doesn't Like the Bank's Policy

The Bankruptcy Appellate Panel disagreed. It held that once the Debtors claimed the funds as exempt, they had an inchoate interest in the funds. This gave them standing to assert a violation of Sec. 362(a)(3), which prohibits acts to "exercise control over property of the estate." The Court found that continuing to hold the funds constituted exercise of control over property of the estate. The Panel wrote:

Wells Fargo asserts that it did not exercise control over property of the estate. We disagree. Wells Fargo could have paid the account funds to the trustee; it did not. Wells Fargo could have released the account funds claimed exempt to the Appellants when demand was made; it did not. Wells Fargo could have sought direction from the bankruptcy court, by way of a motion for relief from stay or otherwise, regarding the account funds; it did not. Instead, it chose to hold the funds until a demand was made for payment that it alone deemed appropriate. If that is not "exercising control over" the funds, we don't know what is. (emphasis added).

. . .

The impact of Wells Fargo's national policy is to turn on its head the balance between rights of parties legislatively created. As a result of the policy, every party, except Wells Fargo, whose rights are impacted by the administrative freeze will need to take action.

Slip Op. at 19, 20.

The BAP remanded for a determination of whether the violation of the stay was willful and whether the debtors were entitled to damages.

The BAP Disagrees With Other Courts

The Ninth Circuit BAP's opinion contrasts with the decisions in Wells Fargo Bank v. Jimenez, 406 B.R. 935 (D. N.M. 2008) and In re Calvin, 329 B.R. 589 (Bankr. S.D. Tex. 2005). In each of those cases, the courts found that until the funds became exempt, they were property of the estate. As a result, the debtors lacked standing to complain that the bank was withholding funds from the trustee. Judge Jeff Bohm was sympathetic to the dilemma faced by the bank, writing:

Under the Bankruptcy Act of 1898, entities owing debts, such as the Bank were shielded from liability even if they paid a debtor post petition as long as the entities were "acting in good faith." (citation omitted). The Bankruptcy Reform Act of 1978 eliminated this provision with the passage of Sec. 542. Entities owing a debt now have exposure to Chapter 7 trustees if payment on the debt is made to the debtor because that debt is owed to the estate until such time as it is abandoned or any exemption becomes final. Under these circumstances, it makes good business sense for the Bank to have instituted a policy that freezes the accounts of depositors who file a Chapter 7 petition. In this manner, the Bank can shield itself from any liability to a trustee while that trustee determines whether the funds are exempt, or nonexempt (or, even if nonexempt, of inconsequential vale to the estate). It is its potential exposure to trustees, not to debtors upon which the Bank must properly focus.

In re Calvin at 604.

A Big Mess

These cases point out an enormous practical problem. Sec. 541 provides that money in the debtor's bank account is property of the estate. Sec. 542 provides that an entity holding property of the estate "shall deliver to the trustee" the property. However, as a practical matter, most funds held by debtors will be exempt or of inconsequential value to the trustee so that the trustee will not administer the asset. Debtors have the expectation that they will continue to be allowed access to the funds since the odds are that they will ultimately receive them. From the Trustee's point of view, it is burdensome to hold funds which will not be administered, but potentially more burdensome to recover those funds from the debtor once they have been spent.

At first blush, the bank appears to be an officious intermeddler. It freezes the funds even when it has no claim to them. Instead of turning them over to the trustee, it holds them. However, Judge Bohm (who was a banker prior to attending law school), has a legitimate point. The Code says turn over the funds. Recognizing that the trustee might not want the funds, the Bank agrees to hold the funds pending direction from the trustee. Of course, trustees rarely provide that direction because it would be burdensome in administering large numbers of cases.

The Ninth Circuit BAP outlined what it believed to be the Bank's options in this situation:

1. It could have turned the funds over to the trustee. This would be appropriate under the Code, but would overwhelm trustees.

2. It could have turned the funds over to the debtor. This would violate the Code and expose the bank to liability.

3. It could have sought direction from the court. While this would be appropriate, it would be very burdensome to the bank when it had to be done in tens of thousands of cases.

Under the Ninth Circuit BAP's opinion, the only viable option for the bank is to transfer the funds to the trustee whether the trustee wants them or not. Of course, there is another option. Trustees could agree to hold banks harmless for allowing debtors access to funds unless directed otherwise. There is no chance that banks will be able to negotiate agreements with hundreds of panel trustees or the U.S Trustee's office would allow them to agree to it.

Since all of the options under existing law are bad, it might make sense to go back to the "acting in good faith" standard under the Bankruptcy Act of 1898 and leave the bank out of the picture.

http://www.lexisnexis.com/COMMUNITY/...atic-stay.aspx