Why do I lose money if my bank goes bankrupt?
You may be wondering why you lose money if your bank goes bankrupt. Fortunately, the chances of this happening are extremely low. However, there is a chance that your bank will make bad decisions and end up losing money - and you may not even know it. In case this happens, you can rest assured that the United States government will reimburse a large percentage of your loss.
Deposits are frozen
If your bank goes bankrupt, they are legally able to freeze your deposits, which they can use to pay your debts. The Bankruptcy Code gives the bank the right to do this and the US Supreme Court has held that it doesn't violate the automatic stay that applies to bankruptcy. If your bank freezes your funds, they're most likely gone for good.
First, you need to find out why the bank has frozen your account. You can get help from a lawyer if you aren't able to reach an agreement with the bank on your own. A bankruptcy lawyer can help you protect your assets from creditors.
Creditors try to collect your debts
If your bank fails, creditors may try to collect your debts through the use of your wages. The process is called wage garnishment, and the lender must get the proper legal documents from a court. The employer is required to hand over a portion of your wages, although the amount is limited by federal and state law.
Debt collection procedures vary depending on the type of debt you owe. If you owe a landlord, for example, they may take you to court to evict you. Utility and phone companies may shut off service if you fail to pay. Hospitals may also try to collect debts owed.
Direct deposits are protected under the Financial Services Compensation Scheme
The deposit protection scheme, known as DCS, applies to deposits from many types of financial institutions. It protects up to EUR100,000 per customer. The amount is based on the risk profile of the bank and its investments. The scheme has strict rules and regulations for banks. These include the minimum amounts of protection and the time periods for which customers can expect to receive refunds. The most recent version of the scheme went into effect on 23 October 2010.
This protection extends to cash in UK banks and building societies. Deposits in eligible UK banks and building societies are protected by the scheme up to a certain amount. This amount varies for different types of bank and building society.
If you have any questions, you can get a free consultation with Ascent Law LLC:
Ascent Law LLC:
8833 South Redwood RoadSuite C
West Jordan, UT 84088
(801) 676-5506
