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Wells Fargo's 'inconsistent' bankruptcy program troubles bank in court
When Rodney Wayne Weidenbenner went to sleep on March 11, 2014, every penny he had left in the world was in four Wells Fargo accounts.
When he woke up, the money was gone — seized by Wells Fargo.
Like many New York small-business owners, Weidenbenner watched his income collapse after the Great Recession. Mounting bills forced the father of two and his wife to file for bankruptcy protection in early March 2014. In the filing, they arranged for roughly $ 6,900 to remain available for essentials: business expenses, prescription medication and diapers for their youngest child.
The nation’s fourth-largest bank had other ideas. Claiming that the bankruptcy code required it to preserve estate funds and follow the trustee’s directions regarding the money, Wells Fargo cut off access to almost all the money, court documents show.
That action stunned a struggling family trying to make a fresh start — and was ruled wrongful control of the Weidenbenners’ bank accounts by Bankruptcy Court Judge Cecelia G. Morris. Last December, Morris awarded the Weidenbenners $ 25 in damages for a bounced-check charge, plus costs and lawyers fees. But the legal is more valuable than the money, lawyer said.
In her ruling, the judge blasted Wells Fargo, which was not a creditor in the case, for freezing the money and controlling access to it. Accusing the bank of “grandstanding” about bankruptcy-code compliance, Judge Morris called out the inconsistencies in Wells’ national program, which only freezes balances worth more than $ 5,000.
Wells Fargo is appealing.
The Weidenbenners have the support of the National Association of Consumer Bankruptcy Attorneys, which has filed a brief supporting their position.
Wells Fargo’s loss in New York marked its first major reversal on this issue after a handful of victories nationwide.
Local bankruptcy lawyers said that more than a dozen of their clients in recent years have endured similar asset freezes by Wells Fargo, which can take up to four weeks to resolve.
A Wells Fargo spokesman said, “We expect the court, on appeal, will follow all other courts, which have held in Wells Fargo’s favor.”
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