Checking Reserve Line Transfer-IS it Preferential?

[JoeKing]

I have a reserve line / over draft acount with my checking account and I made a $800 fund transfer within the same bank from my checking to the reserve line account. Is this considered preferential payment?

[EricaCallaha]

It is possible. If you are filing bk, you don't want to have the accounts that you have now anyway. You need to go to a different bank. The reason is that they may try to freeze your accounts when they get the notice and it is a HUGE pain to get undone. Better just to start fresh.

Good luck.

[JoeKing]

This is the account I setup because I am not including this account into my filing. However, I made that transfer to my reserve line without thinking that it may be considered preferential payment.

[EricaCallaha]

Are you not including it because it has a zero balance for at least 90 days? Otherwise I am pretty sure that you have to put it in. If you can get that $800 back...it might be wise. You don't want to raise caution.

[justbroke]

This is an area of bankruptcy law that is best left to an attorney. Banks may be entitled to a "right of setoff" by offsetting one account with another. Even if the Trustee claims that the payment was preferential, the Trustee would have to fight the Bank and I would venture to guess that the Bank would assert a right of setoff anyhow.

This wouldn't, technically, be your problem, as the Trustee would seek to recoup the money from the Bank and not you personally.

In the end, I think that this is technically a preferential payment because the account is an unsecured line of credit.

[EricaCallaha]

We were told by our lawyer that it is technically an unsecured line of credit. So don't pay it. That is why we couldn't get our Chase account to close right away (along with some cards). But like justbroke said, it is true that the trustee would fight with the bank over it. But this will bring attention to your case that you may not want...

Good luck...maybe ask your lawyer....