OverDraft accounts

[Lanph]

My wife and I have overdraft account lines of credit of $300.00 on 2 checking accounts. Our lawyer is saying that we need to pay these off and not use them before we file. I understand not using them, but why would they need to be paid off?

[AngelinaCat]

I don't understand why either. We were told to have as close to 0 in the account as possible. We actually were over-drafted at the time we filed our Ch7. We also had an overdraft account ourselves, and I do not recall our attorney saying anything about that. We ended up reaffirming that and an automobile loan that we had at our CU, because we wished to stay with our CU. 'Hub had joined it in 1964....

BTW, welcome to the Forum.

[IamOld]

Angelina is of course 100% right! My only thing is this...is it possible your atty said this so that you don't get reported to Chex systems....or did you maybe tell him that you want to keep the account?

[drowning123]

Oh, please! You don't need to pay off jack. I know this from personal experience and the experience of others. I included my checking plus account as a creditor and they were treated like any other creditor. What you should do, though, is close all your entire account with that bank and open a new one at another bank, but you DON'T need to pay off the balance. Do you hear me?

[Lanph]

What if we would like to keep that bank. Would we have to reaffirm the account?

[frogger]

If you want to keep that bank, pay the overdrafts before you file. Otherwise, pay them nothing. Just make sure that if you pay them anything, it is under $600.00.

[moe]

I was wondering about this--if you pay it off in the 6 months before you file, is that a preferred payment?

I'm just sort of confused about preferred payments. What if you pay off things like that?

Is the $600 the upper limit for preferred payments and that's why it has to be under $600?

[IamOld]

Hi - because anything over $600 to an UNsecured creditor could be considered to be a "preferential" payment. I have two of those...Des (and my atty) said that is not relevant to the debtor - the Trustee - if he/she wants to, can try to recover those funds from the creditor.

I was wondering about this--if you pay it off in the 6 months before you file, is that a preferred payment?

I'm just sort of confused about preferred payments. What if you pay off things like that?

Is the $600 the upper limit for preferred payments and that's why it has to be under $600?

[DesdemonaB]

May I ask: Do you mean you used your overdraft line of credit and that current balance of the “loan” is 300? Or do you mean you have a line of credit up to 300 available for use?

An overdraft line of credit is a form of overdraft protection. The line of credit is unique because you only pay for the amount of money you borrow not the number of items you borrow for (per check). If you do not have an outstanding balance on the line of credit then there is nothing to pay off.

If you have a "loan" balance of 300 and want to keep your bank then by all means pay that balance prior to filing, but review your T&Cs for the line of credit to see if they can shut it off due to the BK anyway. Don't most creditors consider filing BK a form of default and close any open accounts even if you don't include them in the BK?

Good luck with everything.

[maddog2112]

We had a $500 overdraft on our checking and never said anything about it thru our ch13, since we didn`t see it as a credit card. We had a zero balance when we filed. It really came in handy from time to time during our 13 when times were really tight. We later converted to a 7 and still have the overdraft. The bank has never mentioned it and neither have we. I don`t no if this was a no no, but that`s what we did.

[IamOld]

maddog, I think others will correct me if I'm wrong, but on the day when you filed, if you had a zero balance, there was nothing to list - they're not a creditor as you owed them nothing.

[maddog2112]

I would hang on to it if possible, as it comes in handy in a pinch.

[PELRDL]

I included a $5K overdraft with B of A, and opened an account at another bank prior to it being reported to ChexSystems. It was no big deal, seriously. Since then, my mum has taken me with her to a few banks to add my name to her account. When told them about the ChexSystems record, they were totally unfazed (I guess they're that desperate for business). I have since closed out all bank accounts and opened a My Smart Cash Account with Fidelity Investments. I looove it! Though it's a tad quirky, they reimburse all of my ATM fees and have no minimum balance requirement. Check it out!