Why You Should Open a New Bank Account

At Hoyes Michalos we recommend that you open a new bank account at a new bank when you file a consumer proposal or bankruptcy.

Why This Matters

When you file a bankruptcy or consumer proposal, where you bank matters. You probably owe money to your old bank, and many of your old creditors probably know about or have access to your old bank account.

If you keep banking where you owe money:

  • Your bank may freeze or withdraw money from your account when they receive your bankruptcy or proposal papers to offset any money you owe your bank
  • Automatic payments, debits and post-dated cheques may still go through
  • You are responsible for any transactions my bank may process (like automatic payments, post-dated cheques, and bank service charges);
  • If you use an account with an overdraft, you are responsible for paying the entire overdraft, even if the bank cancels your overdraft
  • Rent, car payments, or utilities can bounce with little warning if a creditor seizes money from your account

Even if we notify your creditors right away, bank systems take time to update — and computers don’t always stop payments automatically.

Opening a new bank account is one of the most important steps you can take to protect your fresh start.

The Rule To Remember

Your new bank account must be at a new bank where you do not owe any unsecured debt.

If you have — or had — a chequing account, credit card, line of credit, or overdraft at a bank, do not open your new account there.

Here are details on which bank you should pick when you open a new bank account.

What To Do (Step By Step)

Step 1: Open a new bank account

  • Choose a bank where you have never owed unsecured debt (excluding a mortgage or car loan)

Step 2: Move your money

  • Withdraw any positive balance from your old account
  • Deposit it into your new account

Step 3: Switch all direct deposits

Update all deposits to your new account, including:

  • Payroll
  • Pensions
  • Government benefits
  • Child tax benefits
  • Support payments

Step 4: Change essential automated bill payments

Switch ongoing payments you will continue to pay, such as:

  • Rent
  • Utilities
  • Insurance
  • Car or mortgage payments

If a payment can’t be changed right away, arrange to pay by cash, money order, or another method temporarily.

Step 5: Close your old account (if possible)

  • If the account has a positive balance, close it
  • If it’s in overdraft, you may not be able to close it — reduce the overdraft limit if you can
  • The overdraft on your old account (up to the date you file) is a debt included in your bankruptcy or consumer proposal

Step 6: Stop payments from your old account

  • Stop any automatic debt payments
  • Do not give creditors your new account details
  • Some banks treat post-filing withdrawals that create a new overdraft as new debts you must repay

What NOT to do

  • Do not bank where you owe money
  • Do not advise any creditor of your new account number, except mortgage or car payments you intend to continue paying)
  • Do not keep overdraft protection on your new account
  • Do not assume payments will “just stop” on their own

Please call our office at 1-800-472-7775 or email us at help@hoyes.com if you have any questions.