With the flurry of bank closures that have been taking place over the past few months, bank depositors can’t help but feel that it would only be a matter of time before their own bank succumbs to the effects of the economic slump. Well maybe not if you’re banking with one of the more stable banks.

But still, even with the 77 bank failures we’ve already had for 2009, the reality is that more banks will be taken over by the FDIC before the year ends. Unfortunately for consumers, most bank closures happen without warning. And when it does happen, many will be left in a quandary, wondering just how to proceed.

Whatever you do, don’t storm the gates of the closed bank demanding for your money. The process doesn’t quite go as easily as just a mere cash withdrawal. Rest assured though, for as long as your bank is insured with the FDIC and your deposit balance is within the FDIC limits, there’s really no reason to panic.

There are three possible scenarios that could take place following a bank failure and what your next course of action should be will largely depend on which of the following cases apply to your bank.

Case 1: Another bank takes over the closed bank

This scenario is the most common and the easiest to deal with as far as the bank client is concerned. If the FDIC is able to arrange for the immediate sale or acquisition of the failed bank by another financial institution, then following the Friday takeover, it would be business as usual for the closed bank’s customers by the following Monday at the latest – under the new bank, of course.

In most of these situations, customers get to continue using their checks, ATM cards, and debit cards, even while the banks concerned are still in the process of merging transaction records and account databases. Such are the cases with the failure of Washington Mutual last year, taken over by Chase, and with the biggest bank closure for this year, Colonial BancGroup Inc., which was quickly assumed by BB&T.

Case 2: Another bank acquires only the insured deposits while the uninsured deposits stay with the FDIC

If you had more than the insured amount deposited in the failed institution, there is no assurance that the acquiring bank will cover that as well. What happens if the new bank decides to only assume up to the FDIC-insured deposits is that the client will get a claim certificate for the remaining balance of his account from the FDIC.

In the event that the federal agency is able to dispose of the closed bank’s remaining assets, the depositor may then be able to claim the uninsured portion of his original deposit balance. The wait could be long, in some instances taking as long as 4 to 5 years, but the good news is, depositors take precedence over other creditors so bank clients are sure to have some portion of whatever cash the FDIC can recoup from the bank.

Case 3: There is no immediate buyer and the FDIC runs the bank until a new bank takes over

In this last scenario, the FDIC will pay back all insured deposits at the soonest possible time. Customers of the failed bank will be issued a check equal to the balance of their accounts as of closure or up to the FDIC-insured deposit if the amount exceeds the limit. As to where you decide to reinvest your funds is entirely up to you.

Any amount exceeding the limit will be handled in the same manner as in the second case discussed above, i.e. the client will receive the balance or its pro rated value as soon as the bank’s assets are liquidated.

The failure of one’s bank shouldn’t be the end of your financial life. As long as you have taken steps to protect yourself beforehand by banking with one of the more than 5,000 banks insured by FDIC and spreading out your deposits such that they are within the insured limits, it would all be then just a matter of doing what needs to be done to get your banking transactions back in order.

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