Chapter 13 and more questions

[cjsgac]

Hi all!

Getting ready to file Chapter 13 and will probably file in May. We have a great group of attorneys and are currently working on our trustee payment (will probably be about $500/month on a total of $116000+ in cc debt).

I stopped paying everything this month.

We were banking with Wells Fargo. Our attorney told us that they are notorious for freezing your bank account when you file, so we should switch banks, which I have done. We had overdraft protection on our checking, which I was planning on paying off this month. In addition, we are required to get our house painted by June 2010 as we live in a convenant controlled community.

So, here is my question: do I use the cash I will get tomorrow to payoff the overdraft protection or use the cash to paint my house and let the overdraft become part of the bankruptcy? I know ethically, it is wrong, but at this point part of me thinks we should save the cash for what house stuff needs to get done prior to filing.


Help!

[SMinGA]

I am not sure how much you owe on the OD protection - but paying one unsecured creditor over others can create a bit of an issue. If you pay $600+ combined to a single unsecured creditor in the 3 months before filing, the trustee will take that money back to distribute evenly.

Just my opinion, but its time to start thinking about what is in your best interest rather than what is in the bank's best interest.

[forgotten]

The overdraft protection is an unsecured debt. As mentioned, it would be considered a preferential payment. So really, no, you shouldn't pay it.

[debtinohio]

Keep the cash and get the house painted.

Bankrupt the overdraft, make sure all direct deposits go to the new account otherwise they will automatically pay off the overdraft.

I left an overdraft of $5000+ behind.

[cjsgac]

Thanks for all your responses I appreciate the info.

[tammygirl1]

SMinGA/or anyone else who knows this answer, if the trustee takes the money back and distributes it, would it go to priority debts like regular trustee payments do before the unsecured?
Thanks for your response..

[SMinGA]

I believe it gets distributed among unsecured creditors.

The idea is instead of one creditor getting a big payment, it should be distributed among them.

[Licoriceky2]

cjsgac, A little differnt of issue but...FYI we bank(ed) with a credit union, have a truck loan and cc through them as well. My atty that I have retained told me a week and a half ago to "probably" get a new back account with another institution. Last week I consultated with a new atty who told me to move my accounts asap as credit unions freeze accounts. Luckily, I made the move monday, and I found out today that the local credit union "froze" our accounts and the money (only $11.19) in there. We would have been in big trouble had both of our paychecks been captured. My suggestion - move financial institutions asap. I got lucky, do not want you to be sorry!