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Major bank faces flack over bankruptcy policy

Wells Fargo, the major national bank that is a household name in Massachusetts and around the country, recently found itself in hot water with a bankruptcy judge over certain practices it takes when one of the bank's account holders filed for bankruptcy protection.

The judge of the bankruptcy court concluded that the bank had exercised "wrongful control" of a family's bank account after the family had to file for a personal bankruptcy following a business failure. Specifically, Wells Fargo froze most of the almost $7,000 the family saved up, citing a duty to protect the assets that are under the supervision of the bankruptcy court.

The judge did not buy the bank's excuse that it was simply trying to comply with bankruptcy law. In disregarding the bank's argument, the judge pointed out that Wells Fargo only freezes large account balances of over $5,000, even though smaller balances are certainly subject to the supervision of the bankruptcy court as well.

Although Wells Fargo was assessed damages in the amount of $25 and costs and attorney fees, Wells Fargo has still vowed to appeal the judge's ruling, claiming that several other bankruptcy courts have permitted its practice.

When a debtor files a personal bankruptcy, he or she should be able to proceed with relative certainty that his or her property will not be mishandled either by a creditor or by a third party like a bank. Should a Massachusetts debtor experience difficulty with keeping and using property that is rightfully his or hers to use, then he or she should consider contacting an experienced bankruptcy attorney.

Source: New York Post, "Wells Fargo's 'inconsistent' bankruptcy program troubles bank in court," Catherine Curan, June 27, 2015

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