Do they Close your Bank Account in a Consumer Proposal ?

If you are thinking about filing a consumer proposal you might have some questions about your bank account.  We are often asked by our clients if they are allowed to have a bank account or do they close your bank account in a consumer proposal?

You are allowed to keep a bank account if you file a consumer proposal, but in most situations we urge you to open a new bank account before filing your proposal.  There are several reasons for this.

Reasons to open a new bank account:

  1. Your creditors likely know your bank account information.  Opening a new account will eliminate the chance that a creditor might try to withdraw money from your account.
  2. If you have overdraft protection on your account your bank will at the very least cancel the overdraft protection, but may also simply freeze your bank account.
  3. If your account is in overdraft and you continue to use the account you will have to pay back the overdraft in order to continue to use the account.  If you open a new account then you can include the overdraft on your old account in your proposal which means you will not need to repay it.

So, while your bank may not automatically close your bank account in a consumer proposal, there are many risks associated with continuing to use your current account.

In order to reduce the possibility of complications we recommend that you open a new bank account at a bank where you do not have any debts.

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6 thoughts on “Do they Close your Bank Account in a Consumer Proposal ?

  • Jen

    In a consumer proposal if a bank account that has an overdraft is included in the proposal are they entitled to keep the account open? I assumed that the account would be closed and a payment was processed to the account and the bank has seized the funds. Are they allowed to do that?

    • J. Douglas Hoyes

      Jen: When you file a consumer proposal it is important to include the bank account with an overdraft on your list of creditors, and then to stop using the account (by opening a new bank account at a different bank). It may take the bank a while to close the account, but ultimately that’s what they will do. If you deposit money into the account after the proposal starts, the bank will seize the money, although you can attempt to recover it from them (but it’s often a long fight).

  • Wendy

    I am going to be filing a consumer proposal and my bank account is in overdraft. Should I open a new account BEFORE filing? I also owe credit card debt to the same bank. Also, I do have an RRSP with the same bank, should I transfer this RRSP to a new bank as well??

    • J. Douglas Hoyes

      Yes, you should open a new bank account with a new bank (where you don’t owe any money) before you file your consumer proposal. If you don’t, there is a significant risk that the bank will attempt to take credit card payments from your account, or if you deposit money they may apply it against your overdraft.

      The RRSP is less of an issue since the bank is not allowed to collapse it without your authorization. However, since you are establishing a new banking relationship, it’s probably simplest to transfer all of your banking, including your RRSP, to the new bank.

  • sammie

    i am in the middle of a consumer proposal. i am incorporated. Can the bank refuse to open a business account ?

    • J. Douglas Hoyes

      A bank cannot refuse to open a bank account for an individual that is in a consumer proposal. There is no requirement requiring a bank to open a bank account for a corporation, but there should be no reason why a bank would not open a corporate account.


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