You can always have at least $3,000 and often times nearly $30,000 protected in bank accounts. You can also have unlimited protected in retirement accounts. Part of Walker and Walker’s process is to meet with you one on one and go through your bank accounts to make a plan so that you can protect all of your money.
If you’re considering bankruptcy in North Dakota, one of your most pressing concerns is likely what happens to your bank account. The good news is that North Dakota law provides specific protections—called exemptions—that allow you to keep a certain amount of money in your bank accounts even when filing for bankruptcy. However, the amount you can protect depends on several factors, including whether you own a home and whether you qualify as head of household.
Understanding these exemptions is crucial for making informed decisions about your financial future. This comprehensive guide will walk you through exactly how much money in your bank account is protected during bankruptcy in North Dakota, helping you plan ahead and protect your hard-earned savings.
Understanding Bankruptcy Exemptions in North Dakota
When you file for bankruptcy, you’re required to list all your assets, including cash in bank accounts, checking accounts, savings accounts, and even prepaid cards with balances. The bankruptcy trustee examines these assets to determine what can be used to pay creditors. However, bankruptcy isn’t designed to leave you destitute—exemptions exist specifically to help you maintain a basic standard of living and protect essential resources.
North Dakota offers its own set of state exemptions under North Dakota Century Code § 28-22-03.1. Unlike some states, North Dakota requires bankruptcy filers to use the state exemptions rather than the federal bankruptcy exemptions. This makes understanding North Dakota’s specific rules absolutely essential for anyone considering bankruptcy in the state.
The amount you can protect in your bank account falls under what’s called the “wildcard exemption” or relates to the homestead exemption, depending on your circumstances.
The North Dakota Homestead Exemption and Your Bank Account
The homestead exemption is central to understanding how much cash you can protect in North Dakota bankruptcy. This exemption primarily protects equity in your primary residence, but it has significant implications for your bank account protection as well.
If You Own a Home
Under North Dakota law, homeowners can protect up to $150,000 in home equity through the homestead exemption (North Dakota Century Code § 47-18-01). This protection applies to your primary residence—the home where you actually live.
This is very generous, so for people who do own a home, the amount of money that is protected in their bank accounts is a little bit less.
If You Don’t Own a Home
If you don’t own a home, you’re not using any portion of the homestead exemption to protect real estate. In this case, North Dakota law allows you to use up to $25,000 to protect property of any sort at all. This is often used by people who have savings when they start the bankruptcy.
Head of Household Status: Why It Matters
Whether you qualify as “head of household” can significantly impact how much money you can protect in your bank account during bankruptcy, though the effect is more nuanced in North Dakota compared to some other states. Regardless of whether you have a house or not, you can protect $3,750 of money in a bank account if you are a single person, or $7,500 if you are a head of household.
What Does “Head of Household” Mean?
In the bankruptcy context, head of household generally means you’re the primary financial provider for dependents living with you. This might include:
- Minor children living in your home
- A spouse who doesn’t work or earns significantly less
- Elderly parents or other relatives who depend on your financial support
- Adult children with disabilities who require your care
The determination isn’t just about having dependents—it’s about being the primary source of financial support for those dependents.
Additional Protections for Heads of Household
North Dakota provides an additional exemption specifically for heads of household. Under North Dakota Century Code § 28-22-03.1, heads of household can claim an additional $7,500 exemption for personal property beyond what non-heads of household can claim.
This means if you’re the head of household, you potentially have more resources available to protect cash in your bank account after accounting for your home equity (if applicable) and other personal property.
Calculating Your Protected Bank Account Funds: Practical Examples
Let’s walk through several scenarios to illustrate how these exemptions work in practice:
Scenario 1: Homeowner with Full Equity
Sarah owns a home worth $200,000 with a $110,000 mortgage, giving her $90,000 in equity. She has $15,000 in her bank account and is the head of household with two children.
- Head of household personal property exemption: $7,500
- Total potentially available to protect bank account funds: $7,500
Sarah can fully protect her $&7,500 in her bank account, so she would want to contribute the remaining $7,500 to a Roth IRA. We like the ROTH IRA because the money inside is protected, and she can withdraw it after filing bankruptcy without taxes or fees, and then use the money for whatever she needs.
Scenario 2: Renter with Substantial Savings
Jennifer rents her apartment and has $28,000 in her bank account from an inheritance. She’s the head of household with one child.
- No home equity to protect
- Available wildcard exemption because she has no house: $25,000
- Head of household personal property exemption: $7,500
- Total potentially available: $32,500
Jennifer can fully protect her $28,000 in bank account funds.
Scenario 3: Renter with Modest Savings
David rents and has $5,000 in his checking account. He’s not the head of household.
- Available homestead exemption: $100,000
- Total available to protect bank account: $100,000
David can easily protect his $5,000.
Other Exemptions That Protect Bank Account Money
Beyond the homestead and head of household exemptions, North Dakota law provides several other exemptions that can protect money in your bank account, depending on the source of those funds:
Exempt Sources of Income
Certain types of money deposited in your bank account may be protected regardless of the exemption amounts discussed above:
Social Security Benefits: Money in your account that comes from Social Security is generally protected from bankruptcy creditors under federal law, even if it exceeds the state exemption amounts.
Veterans Benefits: Similar to Social Security, VA benefits deposited in your bank account typically retain their exempt status.
Certain Pension and Retirement Funds: While retirement accounts like 401(k)s and IRAs have their own protections, distributions from these accounts that are deposited into regular bank accounts may need to be traced and properly claimed as exempt.
Workers’ Compensation: Benefits received for work-related injuries are generally exempt under North Dakota law.
Unemployment Benefits: Unemployment compensation is typically protected.
The Two-Month Lookback Period
It’s important to understand that when you file bankruptcy, the trustee will typically review your bank statements for the two months immediately preceding your filing date. This means the money in your account at filing plus deposits and withdrawals during that period will be scrutinized.
If you received exempt income (like Social Security) during those two months, you’ll need to be able to trace and identify it to ensure it remains protected. Keeping clear records and separate accounts for exempt income can be extremely helpful.
Strategic Considerations Before Filing
Understanding how much money is protected in your bank account should inform your bankruptcy timing and preparation:
Timing Your Filing
If possible, time your bankruptcy filing to minimize the non-exempt cash in your accounts. For instance, if you receive a tax refund that would exceed your available exemptions, you might consider using those funds for necessary expenses (housing, food, medical care, vehicle repairs) before filing.
Avoid Suspicious Transfers
Never attempt to hide money or transfer it to friends or family to “protect” it from bankruptcy. Bankruptcy trustees can “avoid” or reverse fraudulent transfers, and such actions can result in your bankruptcy case being dismissed or even criminal charges.
Pre-Bankruptcy Planning is Legal
Working with a bankruptcy attorney to legally maximize your exemptions through proper planning is entirely appropriate and ethical. This might include:
- Using non-exempt cash to pay necessary living expenses
- Making needed repairs to exempt property (like your car or home)
- Paying down secured debts on exempt property
Consider All Your Assets
Remember that exemption planning isn’t just about your bank account. You need to consider:
- Vehicle equity
- Personal property and household goods
- Potential tax refunds
- Any other valuable assets
The homestead exemption and other exemptions must cover all your non-exempt assets, not just cash.
How to Claim Your Exemptions
When you file for bankruptcy, you’ll complete Schedule C (the Property You Claim as Exempt form) listing all your exemptions. This is where you’ll identify:
- The specific property you’re claiming as exempt (including bank account funds)
- The North Dakota statute providing the exemption
- The value of the property being exempted
Your bankruptcy attorney will help ensure you’re claiming the maximum exemptions available under North Dakota law and properly documenting the source of funds in your accounts.
What Happens If You Have Too Much Money?
If the cash in your bank account exceeds your available exemptions, the bankruptcy trustee can take the non-exempt portion to distribute to your creditors. However, there are several possible outcomes:
Chapter 7 Bankruptcy
In a Chapter 7 case, the trustee might:
- Take the non-exempt funds directly from your account
- Allow you to “buy back” the non-exempt equity by paying the trustee the non-exempt amount
- Work out a payment plan in some circumstances
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, you don’t lose assets. Instead, non-exempt assets affect your repayment plan—you must pay your unsecured creditors at least as much as they would have received in a Chapter 7 case. If you have significant non-exempt bank account funds, your Chapter 13 plan payments might be higher.
Special Situations and Considerations
Joint Bank Accounts
If you have a joint bank account with someone who isn’t filing bankruptcy with you, typically only your portion of the account is considered part of your bankruptcy estate. However, proving what portion belongs to you versus the other account holder can be complicated.
Business Accounts
If you operate a business, funds in business accounts are generally considered part of your bankruptcy estate, though various exemptions might protect business assets depending on your situation.
Recent Deposits
Large deposits made shortly before filing bankruptcy will receive particular scrutiny. Be prepared to explain the source of any unusual deposits, especially during the two months before filing.
Working with a North Dakota Bankruptcy Attorney
Given the complexity of exemption planning and the significant amount of money at stake, working with an experienced North Dakota bankruptcy attorney is invaluable. An attorney can:
- Accurately calculate your available exemptions
- Develop a strategy to maximize your protected assets
- Ensure proper timing of your bankruptcy filing
- Complete all necessary documentation correctly
- Represent you if the trustee challenges your exemptions
- Advise whether Chapter 7 or Chapter 13 is better for your situation
The cost of an attorney is typically a worthwhile investment when thousands of dollars in bank account protection may be at stake.
Conclusion: You Have Substantial Protection in North Dakota
North Dakota’s bankruptcy exemptions provide significant protection for money in bank accounts, particularly for those who don’t own homes or who have minimal home equity. With up to $100,000 in homestead exemption potentially available for non-homeowners, plus additional head of household protections and exemptions for specific income sources, many North Dakota residents can protect all or most of their bank account funds when filing bankruptcy.
The key factors determining how much of your bank account is protected include:
- Whether you own a home and how much equity you have
- Whether you qualify as head of household
- The source of funds in your account (some income sources are automatically exempt)
- The total value of all your non-exempt assets
Before filing bankruptcy, consult with a qualified North Dakota bankruptcy attorney who can review your specific situation, calculate your available exemptions, and help you develop a strategy that protects as much of your property as legally possible while achieving the debt relief you need. With proper planning and understanding of North Dakota’s generous exemptions, you can navigate bankruptcy while preserving the financial resources necessary to build your fresh start.
