The Freezing of Assets in Bankruptcy

In a Chapter 7 bankruptcy you give up all rights to your assets until the court determines whether you are entitled to keep the property. In exchange for all eligible debt being discharged, the trustee may take your property, sell it and disburse the proceeds to your creditors. While property such as furniture, a car and jewelry remain in your possession during bankruptcy even though frozen from disbursement, other assets, like money in your bank account, may no longer be accessible to you. Chapter 13 allows you to keep your property, but requires you to repay creditors in a repayment plan; your bank accounts may be frozen if you owe the bank money.


Assets include all tangible and intangible types of property that you own. This means that tangible property, like cash, money in a bank account, cars, homes, furniture, a stamp collection and clothing, are considered assets. Even intangible things like stock options, an inheritance received within six months after filing for bankruptcy, intellectual property and the right to file a lawsuit against someone are considered assets while you are in bankruptcy.

Bankruptcy Estate

When a person files for bankruptcy, his assets become part of the bankruptcy estate. This means that while the assets are in the bankruptcy estate, you do not have control over them. Essentially the assets are frozen, since you cannot sell them or give them away. The assets are no longer a part of the bankruptcy estate when an exemption is finalized or when the trustee determines that the property cannot be sold for enough profit. Retirement plans, including a 401K plan, are not part of the bankruptcy estate.

Freezing Bank Account Funds

It is not uncommon for a bank to freeze the cash in your account when you file for bankruptcy. The bank may freeze all your bank accounts, including checking and savings, when you owe it money, such as for a car loan or a credit card. A bank that is acting as custodian for the bankruptcy trustee may also freeze your accounts. When your bank account is frozen, the money you have in the accounts on the day you file for bankruptcy may be frozen by the bank. Any subsequent deposits, however, will not be frozen, and you may use this money to pay for living expenses.

Exemptions and Frozen Assets

You will have control over your assets again if the court determines that the property is exempt. Every state has a list of property that is exempt up to a certain amount. If your property is covered by an exemption, you get to keep it. Consequently, the property is removed from the bankruptcy estate and you will regain control. This also includes money in a bank account that has been frozen. At this point, exempt funds must be unfrozen. Normally, this process takes up to a few weeks from the time you file.

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