I just got an email from a reader in PEI with a question many of you have probably been wondering about:
We switched to a different banking institution during bankruptcy, as advised by our trustee. At our previous bank we had a joint account, an outstanding loan & a mortgage. (We currently still have a mortgage with this institution, we did not lose the house in bankrupty) We were discharged from bankruptcy in Dec 2010. My question is – Is there any reason why I cannot go back to my old bank again to open a joint account again? I really preferred them for many reasons. Besides the embarrassment of bankruptcy, that was the next toughest thing leaving my old bank.
– Curious in PEI
Well… let me tell you about my situation. Back in 2007 when I was getting ready to file for my bankruptcy, my trustee advised me not to use a bank account with any bank I owed money to. As it happened, I owed money to 4 out of the 5 major Canadian banks, and all of those debts were being included in my bankruptcy. The only bank I did not owe money to was Scotiabank. I did not have a bank account with them, but opened a chequing and a savings account with them just days before my bankruptcy got officially filed. Again, this was on the advice of my Trustee in Bankruptcy – theory being that since I was including debts from other banks in bankruptcy, it was better not to take any chances leaving any of my money in bank accounts with them, especially during the time when I was an undischarged bankrupt. And ScotiaBank was the only bank I did not have any ties to, so that’s where I banked.
Maybe this was a case of being overly cautious. That thought crossed my mind even back then. But I see other trustees are also suggesting this, so there must be something to it. I dont’ recall if I closed my old bank accounts or just withdrew my money out of them and let the accounts go dormant.
But I took a chance on one bank account… AFTER my bankruptcy was discharged. Sort of. I had a No-Fee chequing and savings account with PC Financial, which is connected to CIBC. I noticed it was still open and active after I was discharged. Being a virtual bank, they don’t have any branches (aside from kiosks in Presidents Choice stores where you can open an account). However, you are allowed to use CIBC bank machines (ATMs) without incurring service charges. And their bank transit number identifies them as CIBC. During the nine months I was an undischarged bankrupt, I did not make a single transaction on any of my PC Finacial accounts. I only used my ScotiaBank accounts. But once my bankruptcy was discharged, I decided to try using my PC Financial account and CIBC bank machines. That was over 4 years ago, and I’ve been using those accounts on a regular basis with no problems whatsoever, or any reminder of my past bankruptcy.
Maybe it’s because PC Financial is only indirectly linked to CIBC. Or maybe it’s because I waited until my bankruptcy was discharged. I’m not sure what would have happened if I had used that account during the nine months I was an undischarged bankrupt, but I did not want to take a chance on depositing money and having it confiscated. Sure, I was declaring all of my income to my trustee, and could have provided proof that it was legitimate. But I figured… why take the chance? If the bank took my money in error, I might get it back eventually, or I might not. Or it could be like when someone has a bank account that is overdrawn, or has his/her wages garnished. That’s money you’ll never see again.
I also opened a savings account at TD Canada Trust, AFTER my bankruptcy was discharged. I have to admit, I was really nervous about this because I had included a TD Visa card in my bankruptcy. I didn’t ask anyone at the bank about this, figuring if they didn’t notice, why bring it to their attention? And if it was a problem, it might have come up at the time I opened the bank account. When I first started using the account, I started out with a small amount of money, so in case I lost it, I wouldn’t be financially ruined. I can honestly say that after 4 years of using that bank account on a regular basis (all since my bankruptcy was discharged), I have not encountered any problems.
So, now that I’ve explained all of this, that should give you a good idea of what you can do in regards to going back to your old bank. In the end, the decision is yours. I don’t know which bank you are referring to, but I’m guessing it’s a branch of one of the five major banks in Canada. Or maybe it’s a credit union. Either way, it sounds like you prefer that branch and the people who work there – not just the bank itself. Since you kept your mortgage with them throughout your bankruptcy, and the bankruptcy has now been discharged, I would “think” it’s safe enough to go back.
If you were not yet discharged, I would advise against it. During those months where you are an undischarged bankrupt, you have to track all of your money. And I would also consider it risky to use a bank account at a bank where you have a loan or credit cards from. But since you’ve been discharged, you should be fine. Of course, there are no hard and fast rules on this, nor can I find any documented proof of this. And if you asked people, they would probably base their answer on opinion, rather than fact. It happens a lot more often that you would think – even with bank managers (ask me how I know). Good for you on being cautious about this.
I’m not sure if you included any debts from that bank in your bankruptcy, like a line of credit, a small loan or a credit card. Or maybe it was just your mortgage. That was great you were able to keep your house. I’m guessing they let you keep it because you did not have enough (or any) equity in it, or based on your income and expenses they let you keep it. In any case, that decision was out of your hands. I’m sure you were happy to keep your house.
There are no guarantees, but I think if you open a joint account, or even a single personal account, and “test” it out with a small, but reasonable amount of money. Maybe keep $100 or $200 in the account. Whatever you would feel comfortable losing in the even there was a problem. I don’t think you’ll have one though. Either keep the money in the account for a few months, or use it for paying bills using online banking.
If you feel comfortable approaching someone on staff at the bank, ask him or her if it’s OK to re-open an account with their bank now that your bankruptcy has been discharged. It may also help that you had previously done business with them, as long as your accounts were in good standing. If you routinely bounced cheques and overdrew your account, they probably won’t be too happy to do business with you. But otherwise, they might just let bygones be bygones. Those old debts have been written off. You’re both on a new page now. I would not even bother bringing up the bankruptcy. If they remember it, fine. If it’s going to be a problem, you will probably be aware of it very soon. And if it’s not a problem (as I suspect), you can open and use that new bank account as if nothing had happened.
If you, or any other readers are paranoid, wait 6 years for your bankruptcy to fall off your credit reports. Plus, time has a way of healing many things. And if you’re super paranoid, you may never want to do business with that bank again! That might be overkill, especially if you were like me, and included 4 out of the 5 major banks in your bankruptcy. That doesn’t leave too many choices!
So, in the end, I can’t tell you 100% for sure that you will not have any problems. But based on my own personal situation as described above, with no ill effects, and since your bankruptcy has been discharged, it would seem safe enough to go back to your old bank – especially since it’s a bank you would prefer to be with. The worst part might be the “embarrassment” of the bankruptcy, as you stated. But I wouldn’t even bring that up, unless they do, or there’s a question about a past bankruptcy on the application.
There’s always the chance that since a couple of years have passed, the staff at the bank may have even forgotten you filed for bankruptcy. But if it’s a small town bank where everyone knows everyone, they might not have forgotten. However, YOU are probably the one who is the least likely to forget about it since it was a significant even that happened in your lives.
If you decide to go back to your old bank, please use caution. I don’t think you’ll have any problems, but again, I can’t make any guarantees. And unless you get something in writing from the bank, I don’t they can make any guarantees either. Like I said, start out slowly, with a small amount of money and see how it goes. At this point, you should be fine. Good luck!