70/90 Day Rule & Essential Purchases

[anonymuse]

I'm dead broke this month (yearly medical deductible, broken windshield, and 2 days missed work due to illness).

I have 16 cents in my account and about $40 cash to last me Feb 28 payday.

Phone/DSL, home equity, and DirecTV can be put off until March 1st.

Prescriptions and doctor copay can't wait until then. Food and gas would be nice too.

What happens if I go into my overdraft for about $100? Am I messed up with the 70/90 day rule?

[HHM]

First off, if you can, DO NOT USE your overdraft for this. Use a credit card (if you can). Reason being, your credit is already shot (more than likely anyway), no reason to get yourself flagged by chex system.

Also, to clarify the 70/90 day rule.
90 day rule...charges (on credit cards), in aggregate of $500 owed to a single creditor that was incurred within the 90 days prior to filing BK "and" was for luxury goods and services are presumed fraudulent.

70 day rule...cash advances aggregating more than $750 that are extensions of credit, (i.e. credit card convenience checks) are presumed fraudulent.

Note the big difference, the 90 day rule limits the fraud to purchases of luxury goods, the 70 day cash advance rule does not. So, for the 70 day rule, it does not matter how you spend the money, it will be presumed fraudulent if the total amount is $750 or more, but for 90 day rule, you CAN use a credit card to purchase necessary items within the 90 days, and have it NOT presumed fraudulent.

[anonymuse]

It's a Visa debit card with $1000 Visa credit overdraft coverage. (I owe about $300 on it anyway that will be added to my filing. ) And it always registers through as a credit transaction when I use it. Does this make any difference?

Note: I have moved most of my banking from a credit union to a new bank since the credit union also holds my home equity loan and this overdraft credit.

[anonymuse]

Also, I plan to pay it back once I'm paid.

[HHM]

It is not the ideal way to go.

DEBIT cards are NOT credit cards. They will ring up as credit cards because the transactions are handled by either Visa or Mastercard (they are the transaction clearing houses for debti cards, so they use the same clearing system as credit cards), but make no mistake, they are tied directly to your checking account. You file BK on an overdraft line of credit, the bank can opt to close your account. It is as if you are using your overdraft as a payday loan because as soon as money hits your account, the bank will usually automatically deduct what you owe them, PLUS any fees etc.

I realize you are in a tight situation, but can you think of another way. Using overdraft and then declaring BK always gets messy.

[JollyGG]

We had a credit card linked to our checking account as our overdraft protection. Each overdraft transfer was considered a cash advance. So be very very careful. We would have been better off doing as HMM suggested and using the card itself when we knew we would be over instead of letting the overdraft protection take care of it.
Just be sure you read the fine print of your agreement and be sure it is considered a credit card purchase not a cash advance.

[JollyGG]

Also, I plan to pay it back once I'm paid.

Wouldn't that bring up preferential payment issues?

[HHM]

Wouldn't that bring up preferential payment issues?

Possibly, but if we are talking about amounts less than $1,000, the trustee is probably not going to make an issue of it.

[anonymuse]

Wouldn't that bring up preferential payment issues?

I would only use $100 max from it and it would be on two necessary prescriptions and a copay for the doctor.

Gosh, this month stinks! (And, of course, I can't get the laywer to answer any of my calls/emails)

[emoney]

You say that you are broke, and yet you have DSL and DirectTV. What gives???
Food, utilities, and shelter should be at the top of the list of needs. Do you have some wants listed on your list of family needs?
Just my thoughts.
emoney

[Kam]

Emoney, that's kinda a mean thing to say. Anony said things happened this month she didn't anticipate: being away from work, a broken wind shield, etc. The BK courts *do* allow people to keep utilities such as TV or internet connection.

[Spartan]

Isn't that waht the overdraft coverage is for? As i recall, back when I had an overdraft coverage protection of my WellsFargo checking account, the overdraft protection, allows you to OVERDRAFT your checking account by that amount.

If you have a $1000 coverage and you have used up $300, then there is still $700 you can write checks on.

It is basically a loan, a cash advance from the bank to cover your checks,or debit.

IF that is what you have, you are in good shape. Just use the overdraft protection. It is a loan.

[aa06a47]

I agree with Spartan, use the overdraft protection and get your medicine, food, and groceries, and some gas if you need to. You won't be messed up with the 70/90 rule. For one, a creditor won't spend the 500-1000 bucks to fight you in court over $100, and the cost of not eating / taking your medication might end up costing you more than 100 bucks long term.

[anonymuse]

You say that you are broke, and yet you have DSL and DirectTV. What gives???
Food, utilities, and shelter should be at the top of the list of needs. Do you have some wants listed on your list of family needs?
Just my thoughts.
emoney

DSL is necessary for my job. Otherwise, I would have to travel over 100 miles roundtrip to take care of a 20 minute problem. Plus, it relieves me from having 2 phone lines, plus, I'm trying to get a second work at home job where it would be necessary.

Where I live, I only get one channel reception with an antenna--I get barebones DirecTV (cable is more expensive), and yes, I can see how some see it as a luxury (I'm including it in my entertainment expenses when I file), but that's the only thing I spend on entertainment.

Sometimes you have a month that really stinks. I was out sick--$300 lost pay right there. Two Rx copays $80. Broken windshield $100. That's $500 that wasn't quite in the budget and we've all had months like that.

[anonymuse]

First off, if you can, DO NOT USE your overdraft for this. Use a credit card (if you can). Reason being, your credit is already shot (more than likely anyway), no reason to get yourself flagged by chex system.

Also, to clarify the 70/90 day rule.
90 day rule...charges (on credit cards), in aggregate of $500 owed to a single creditor that was incurred within the 90 days prior to filing BK "and" was for luxury goods and services are presumed fraudulent.

70 day rule...cash advances aggregating more than $750 that are extensions of credit, (i.e. credit card convenience checks) are presumed fraudulent.

Note the big difference, the 90 day rule limits the fraud to purchases of luxury goods, the 70 day cash advance rule does not. So, for the 70 day rule, it does not matter how you spend the money, it will be presumed fraudulent if the total amount is $750 or more, but for 90 day rule, you CAN use a credit card to purchase necessary items within the 90 days, and have it NOT presumed fraudulent.

I'm glad I came back and read this again--I was always thinking ANY purchases within 70/90 days were a red flag and thinking I had to postpone filing (that's the impression the lawyer gave just saying its safest to wait). Here I am trying to figure out how to pay back this LOC back $225 for medications and a power/gas bill paid within the last 90 days. Guess I have one less thing to stress about now.

Thanks, HHM.