All's Wells that Ends Well, if it eventually ends well

Wells Fargo and Union Bank: 2 popular institutions that freeze bankruptcy filers' funds. Meaning, monies on deposit at the moment of filing are placed in trust for disposal by your chapter 7 trustee. Pray tell, why? Such funds constitute part of the bankruptcy estate or property of the debtor, which is subject to liquidation by the trustee. Your stuff may be sold for repayment of (some) of your debt. Yet, in practice, liquidation rarely transpires (if your attorney's on the up and up). The debtor is entitled to keep the shirt on her back (in fact, up to $23,250 of cash may be exempted or shielded from liquidation). Greater funds may be nonexempt and lost. However, a debtor seldom possesses nonexempt funds, either within or without of the bank: a debtor by our definition has little to spare.
Thus, the freeze is a meaningless exercise, most often. The trustee almost invariably instructs the bank to release the funds to the account owner; generally, the funds are modest. They are necessary for necessities. The rub, though is that such release may not come for a month or more.
There is a rationale to the Wells and Union policies. Sections 541 and 542 of Title 11 (the Bankruptcy Code) confer upon entities in possession of debtors' assets an obligation to preserve the so-called bankruptcy estate (the debtor's property). Yet the statute explicitly excepts such "preservation" of assets that are of inconsequential value to the estate. That exception has been glossed over. While a higher threshold figure triggers the freeze by Wells Fargo, Union Bank freezes de minimis (great phrase, huh) or negligible amounts in apparent violation of the statute (e.g. withholding 2 bits on deposit, just because). And Wells Fargo takes an all or nothing approach. If you have $3K on deposit, they will freeze all the $3K; you could not access a dime; if nothing's stashed beneath the mattress, and you like to, say... eat, then prepare to situate at the corner light, with your tired, weary and huddled. And a makeshift beggar's sign.
In any event, statutes are black and white. We need the courts to sort out the inherent grayness of life. Section 542 was interpreted in the banks' favor in a few cases, to wit, In re Calvin from a Texas Bankruptcy Court and In re Jimenez from a New Mexican District Court (Old West states take to Wells's stagecoach silhouette). Those courts concluded that freezing was, uh... cool. No pun intended, yet I now picture the punning Arnold Schwarzenegger as Dr. Fries-cum-Mr. Freeze. You know, the rogue-gallery fiend with a freezing gun, star of the corny-campy feature, Batman and Robin. Picturing it, I struggle not to gouge my mind's eye. Gray-matter's numbed by the likes of, "My name is Mr. Freeze, learn it well, for it's the Chilling sound of your doom./You're not sending me to the Cooler!/ I'm afraid my condition has left me Cold to your pleas of mercy./Cool party!" And the indelible, "Ice to meet you!" All voiced in Ah-nuld's wonderfully terrible speech. Thank you to the pitiable folks who assiduously populate the "quotable" quotes section of the Internet Movie Database.

Then came the 9th Circuit (which includes California) Bankruptcy Appellate Panel (BAP) decision of In re Mwangi, which ruled against Wells. Splendid, yet the BAP decision is not binding upon our lower-level courts where we conduct our daily disputes. The matter would have to be decided in the 9th Circuit Court of Appeals before we can rest easier and not fine-tooth-comb our clients' accounts prior to filing.

AA, San Diego, CA