July 7, 2010
This has been an ongoing problem with Wells Fargo. When one of their banking customers files for bankruptcy, they slap a freeze on the customer's savings accounts - they claim because they have a duty to preserve assets of the estate. Well, actually, they don't. That responsibility falls to the debtor. When someone else does it, they are exercising control over the bankruptcy estate in violation of the automatic stay. The following is an excerpt from "Consumer Bankruptcy Abstracts and Research":
Debtors scored a big win last week when the Ninth Circuit Bankruptcy Appellate Panel held that Wells Fargo’s national policy of placing an administrative freeze on debtors’ accounts when they file a bankruptcy petition violates the automatic stay by exercising control over property of the debtor's bankruptcy estate in violation of Bankruptcy Code section 363(a)(3).
The BAP was quite emphatic is its opinion: "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 [debtors] 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."
In re Mwangi, Case No. 09-1408 (9th Cir. B.A.P., June 30, 2010).
This has been an ongoing problem with Wells Fargo. When one of their banking customers files for bankruptcy, they slap a freeze on the customer's savings accounts - they claim because they have a duty to preserve assets of the estate. Well, actually, they don't. That responsibility falls to the debtor. When someone else does it, they are exercising control over the bankruptcy estate in violation of the automatic stay. The following is an excerpt from "Consumer Bankruptcy Abstracts and Research":
Debtors scored a big win last week when the Ninth Circuit Bankruptcy Appellate Panel held that Wells Fargo’s national policy of placing an administrative freeze on debtors’ accounts when they file a bankruptcy petition violates the automatic stay by exercising control over property of the debtor's bankruptcy estate in violation of Bankruptcy Code section 363(a)(3).
The BAP was quite emphatic is its opinion: "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 [debtors] 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."
In re Mwangi, Case No. 09-1408 (9th Cir. B.A.P., June 30, 2010).
Closed November 2010
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