Advice re: checking account overdraft protection

[zpbk13]

I have left a message for my attorney but she can be slow in returning calls sometimes so I hope someone can answer this question for me.

We have an account that has $200 of overdraft protection. It is paid back automatically everytime we make a deposit such as on direct deposit payday. Then because they have paid the "loan" back, I turn around and use those funds because technically I am $200 short and need the funds. It has been a never ending cycle for a couple of years now.

I understand that everything is included in the bk, including this $200. Is that correct? I thought my attorney said I could pay the amount owed and keep the account as long as there was no amount owing the day we filed. Does that sound right? Would this $200 be considered a preferential payment? If I have a negative balance and include the amount in the bk, will I put on check systems? Maybe I am overthinking things and should just include the account in the bk and open a new account. Free checking accounts are a dime a dozen. Any comments or anyone have an experience with this type of thing?

We are signing papers on Saturday and if I should open a new account, I would like to do that beforehand. Thanks!

[hopeforusall]

I included a bank account with a negative balance in my bankruptcy and the bank proceeded to close my account after a month or so. No doubt I was reported to the check system as well. About six weeks or so before bankruptcy I had already established another bank account that I was using for my employer direct deposit. This account was listed on my schedules as my open bank account, stating how much I had in the account and exempting any funds as necessary. My old account with the negative balance was listed with the creditor's as part of the bankruptcy. I would ask your attorney again if the 200.00 payment would be seen as preferential. If it is not, then I would keep your current account. You will also need to stop overdrafting your account right away as that is continued credit expenditure. Also you might want to open a backup account with a few dollars just to be covered. It may be difficult to open new bank accounts after filing for bankruptcy and it definately will be if you decide to file your 200.00 as a debt in your bankruptcy.

[hamburgervol]

IMHO, overdraft protection is no different than a payday loan(way for banks to make tons of cash). It should be law that you can elect to not have overdraft protection. Granted some have been thankful that their house payment was paid with a $35 overdraft fee.

It has it's pros and cons...but more cons...IMHO

[AngelinaCat]

We reaffirmed our automobile loan--we wanted to keep the car--and an overdraft protection loan with our CU because we wanted to stay with the CU. Otherwise, our accounts would be closed and that would be that.

We had no problem with those items in our BK. Our overdraft is 2K but we have never been able to put more than about $100-200 in it at any one time. When we filed, we actually had a negative balance in our checking account, so that meant the Overdraft was out too.

[bkmaggster]

In preferential payments they are looking for payments of over $600 in the 90 days prior to filing. So if you did $200 for 3 months you will include it in your schedules. Then it will be up to the trustee to get it back and parcel it out to your other creditors. For $600...it probably isn't worth it, but it could happen.

[zpbk13]

Thanks everyone. I did talk to my attorney but did not have a chance to bring up the account thing. I would actually rather talk face-to-face with her about it on Saturday. Also, I almost forgot that I do have another checking account. I almost never use this account but it will do me just fine and it does not have overdraft protection or a line of credit attached to it so no worries there.

I just checked the account in question and for some reason, miscalculated how much we had in there. It turns out the full $200 checking reserve is there - untouched - so I will check with our attorney and see what we should do. For some reason I thought we had dipped into it this pay. I will ask my attorney about the preferetial treatment issue when I see her because I would like to keep this account and since we do not owe them anything, if I could have them take the reserve off the account then I would expect I can keep the account open.

Thanks everyone for your help!