It happened again this week, and it is really beginning to aggravate me a little. I like Wells Fargo, I think they are a very well-run bank. OK, I sue them sometimes in bankruptcy court but it's nothing personal!.
Anway, they monitor all the bankruptcy filings in the U.S., and if you file chapter 7 bankruptcy and you are a signer on someone else's account at a Wells Fargo Bank, and there is more than $5000 in it, those funds are likely going to be frozen, at least until you or your attorney can get the bankruptcy trustee to write a letter that he is not claiming the funds.
This week, the debtor husband's parents had him as "payable on death" so that when they pass away, he gets the money in the accounts. It was two CD's totalling about $50,000 and their checking account with about $1500 in it. Wells Fargo checks all the bankruptcy filings every night, and froze their accounts!
We had asked the debtors if they were a signer on anyone else's bank accounts, and they had told us no. We also have people sign an Acknowledgment that explicitly warns them about this situation. Maybe they forgot.
Anyway, I got the trustee to sign a letter and we faxed it to Wells Fargo and got the funds released. But what a hassle! And who died and made Wells Fargo the God of bankruptcy anyway? The Ninth Circuit has ruled against this practice, but unfortunately that is not the law here in the 5th Circuit, there is case law precedent here that has determined it is not a violation of the automatic stay or otherwise illegal for Wells Fargo to do this.
So watch out! Either get your name off of your relative's accounts at Wells Fargo (at least temporarily), or be prepared to explain to them that you had to file bankruptcy and that their funds may not be available to them for a while.