Would this be considered a preferential payment?

[optimistic1]

My wife has a credit union account with an overdraft line of credit. The minimum payment of $25 is withdrawn on the checking account every 25th of the month.

We didnt want to default on that account and continue to pay it, because they will close all of her accounts.

We also did not want to get a new bank account, we want to just keep it the way it is.

So, when we file the petition, will this pose any type of problem? We will not draw any more money from the overdraft within the last 90 days, but it still will show payments being made to it.

[Ifonly]

I may be mistaken but my understanding is that you should get a new bank account. If you leave it the way it is, as soon as you file the CU will empty your checking account (and freeze it) to pay the overdraft balance as they are a creditor.

We had the same situation with BofA - a checking account and two debts. I opened a new checking account, moved everything over and closed the old checking account.

I also believe that you can not pick and choose creditors to include in your bankruptcy.

[optimistic1]

I dont see why they would be so foolish to do that, they cannot collect for the debt if the automatic stay is in place, no matter what the contract states, or if there is a cross collateralization clause.

I would not be picking and choosing, I would be including the overdraft debt in the creditor matrix. I just dont want to hassle with getting a new bank account, my wifes credit is already shot, so most of them just wouldn't even approve her.

[AngelinaCatHub]

I dont see why they would be so foolish to do that, they cannot collect for the debt if the automatic stay is in place, no matter what the contract states, or if there is a cross collateralization clause.

I would not be picking and choosing, I would be including the overdraft debt in the creditor matrix. I just dont want to hassle with getting a new bank account, my wifes credit is already shot, so most of them just wouldn't even approve her.

Best believe it is true. Your checking account online banking and all will be frozen and any outstanding checks will not be honored. If you wish things to stay the same, call the bk department of your CU and have them draft papers for reaffirmation. I belong to a CU for 44 years and wham it was froze. They reopened upon my word that the reaffirmation papers would be signed and they were. 'Hub

[Ifonly]

Personally I would just open a new checking account...credit shouldn't have anything to do with it, unless you currently owe another bank for a negative balance you've left behind. My husband and I opened at a small community bank, no problem. I understand it's a PITA but I'd much rather know that my few hundred dollars can't be grabbed and that I can pay the electric bill...just me.

[optimistic1]

We are going a little off topic, let me set this straight, the overdraft line of credit will be current up until the date of filing the petition. I would be calling the credit union personally with the case #, I dont see how it would be even slightly beneficial for them to freeze my bank account. The best they can do is file a claim and get their $500.

[filingin08]

I can't imagine $25 a month would be seen as preferential. I think the amount is $600.

Even if it's not in the CU's best interest, they MAY still freeze your account. That's entirely at their discretion. Then what would you do? And even if you could fight that they release the funds and honor checks, what do you do in the interim?

As other posters can attest to, CUs DO freeze accounts. Maybe you could open another account, just for security. If the CU doesn't close the account, good for you. If it does, then you're prepared.

My CU didn't close my account, but I have ZERO activity with them other than checking/savings.

[StartingOver08]

My CU did not freeze my account. HOWEVER, since I did BK on the second mtg and a credit card with them (reaffirmed my car); I was not allowed to use my account upon discharge.

The CU said because of the loss (mtg and cc), I could not keep any checking or savings accounts with them. They have been nice about it, but I can't use the checking or savings with them and I did not have a negative balance with the checking account at all. BTW, I was prepared for this and had opened another account elsewhere right after filing.

So you may have to open another account elsewhere once you are discharged.

[optimistic1]

Thanks everyone, I will be opening up a backup checking account for my wife and I at a different bank. Im just hoping that they dont deny us for the 120+ days late on our credit files.

If that happens, I will just have to shop around constantly, until someone lets us have one.

[EricaCallaha]

We had no problem getting a new account. We opened a new one about a month before our papers were filed. Our credit was completely trashed with charge-offs and 120+ days late creditors. They will just not offer you any products besides checking and savings.

You should also empty your CU account and stop all activity on it. Close it if you can so you don't get assessed overlimit fees if they try to take money out of it. Keep good records as to when you have done all of this.

I know it sucks to open new accounts but it is so worth it in the end. The banks know that they are not supposed to mess with your checking and savings, but if they are cross-collateralized, it doesn't seem to stop them. It takes forever to get it straightened out.

Good luck.

[optimistic1]

Thanks Erica, I will be planning this out just prior to filing the BK.

[crookedoak]

I or the wife never had any issue with any of our accounts, even opened during. No accounts were ever closed.