Banks violate the automatic stay when they require you to pay past debts in order to open an account.

June 29, 2010 – Today Judge Isgur of the Southern District of Texas suggested that banks may be violating the automatic stay when they require payment of overdrafts or other debts in order to open an account.  He stated that this is a frequent occurrence in his court that debtors are required to pay these balances.  He did not make a definite ruling but invited the debtor in a case to file a stay violation lawsuit.

The thing to do is to tell the bank that they are violating the automatic stay, ask for a supervisor, and most importantly ask them to put it in writing then go to your bankruptcy attorney and file the lawsuit.  If we as debtors’ counsels get more aggressive the banks will change their behavior.  This case involved First Convenience Bank which I recommend clients to avoid because I think they are predatory when it comes to overdraft fees and authorize debit card purchases when there is no money in the account only to charge a $30 plus overdraft fee and let the consumer run up hundreds of  dollars before they stop.

Moving from one state to another sometimes means that you still pack with you the laws of the old state.

Most bankruptcy judges will let you claim the federal bankruptcy code exemptions to keep your property in Chapter 7, even if you moved to Texas less than two years ago from a state that does not allow you to use these exemptions.  The reason for this rule is that most of the states that have opted out from the relatively generous federal bankruptcy exemptions have limited their opt-out law to its own residents.  A concern however is that a growing minority of judges are ruling that regardless of explicit residency restrictions the old state’s exemption laws apply.   This means that if you move from another state to Texas less than two years before filing that state’s law applies and if you lived in more than one state during these two years then it is the state where you lived the majority or greater part during the 180 days before the two years that applies.   This may sound complicated, but I do this analysis all the time as many of my clients have recently moved from out of state.

Attached is an opinion from Judge Marvin Isgur that is an example of this troubling trend.  The solution is to get a bankruptcy attorney who does not mind anaylizing your rights under another state’s law in case you end up with a judge who takes this position.  I have found though that most of the time there is little resistance to claiming the federal bankruptcy exemptions, but in cases where there is a lot of property caution should be exercised in case you end up with a judge that takes this position.

Opinion holding that prior state’s laws apply