In some cases, the FDIC will reopen defunct banks as FDIC-controlled entities for a limited time, often with the help of a local institution, to “provide continuity of service to the depositors and minimize the problems the resolution is imposing on the institution’s depositors,” Cole says.When New Frontier Bank of Greeley, Colorado, failed on Friday, April 10, 2009, it reopened the next Monday as Deposit Insurance National Bank of Greeley and continued checking services, including direct deposit, until May 8, when it was shut down for good.Two types of bankruptcy are popular among individual debtors: Chapter 13 and Chapter 7.In a Chapter 13 bankruptcy, you pay all or a portion of your debts over time, following an approved payment plan.But when a buyer can’t be found, things can get more complicated for account holders.The process of permanently closing a bank and its branches, selling off any assets and using the proceeds to settle as many of the bank’s remaining liabilities as possible.To prevent a mass exodus from the bank before it’s taken over, the FDIC keeps its troubled-bank list a closely guarded secret.You can deposit your paycheck on a Friday afternoon and return Monday to make a withdrawal, only to find the bank out of business for good.
“The FDIC was unable to find another financial institution to take over the banking operations of The Community’s Bank.
“Essentially, the FDIC comes in on Friday afternoon after closing, relieves the existing management of authority and takes everything over, and usually by the following Monday morning they’ve reopened under the banner of the acquiring bank,” says Rebel Cole, professor of finance at De Paul University in Chicago.
But in rare cases — about 6% of bank failures since 2000 — the FDIC has been unable to find a buyer for the bank.
GABRIEL BOUYS/Getty Images Most bank failures end in a sale — the Federal Deposit Insurance Corp.
takes on the defunct bank’s troubled assets, a healthy bank buys the rest, and customers’ accounts keep right on going.