PayPal custodial accounts with credit lines attached to them...

[Avand18]

Has anyone else had experience with the following? (Searched but no direct answer to my situation)

Has anyone here filed or knew someone who filed a BK7 who had PayPal merchant accounts to purchase from or accept buyer payments, who also had "smart connect" or "buyer credit" lines attached to them, with balances??

It appears that HSBC owns those credit accounts, and if a BK7 were to be filed, shouldn't they just close and strip the lines of credit off the PayPal merchant accounts and otherwise leave them alone?

My wife operates an eBay business where she primarily accepts payments on one PayPal account and buys through another. I'm just trying to make sure that we don't have to open entirely new PayPal merchant accounts or risk being barred from doing so due to the credit accounts being closed - because if either were to happen, the business would certainly tank as our profit margin has become extremely narrow in 2011 and inability to accept online payments would probably cut that down by 75%.

I'm just asking this here as to not call PayPal and get any flags thrown pre-BK. In the meantime I suppose a good safety net procedure would be to open a new PayPal account with no credit attached and leave it idle, so that if something happened with the current ones it would be a place to resume business.

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[BTW these merchant accounts were not contingent on there being lines of credit; the credit was added at a later time as a "courtesy" by PayPal.]

[tobee43]

yes i have and had a paypal account and have been selling on ebay since about 1995. i didn't have to list the paypal account because it was empty and any "cards" were just automatically closed when i filed since i listed them. however, it did not effect my selling or buying on ebay , or my ability to accept paypal payments at all. however, i didn't do much business to have ton of money to claim as sales.

[Flamingo]

Attorneys and trustees are well aware of Paypal "custodial" accounts and the lines of credit and/or checking accounts or credit cards with other banks tied into them. If there are funds that go in and out of the account, they have to be reported to your attorney. There is an entire legal and account section in Paypal that describes the account and its terms. The paypal "custodial" account itself is probably safe (as would be a checking or savings account) but any line of credit tied into it or credit card tied into it will probably get closed out. I suggest you review all those terms and conditions in the account itself and discuss with your attorney.

[tobee43]

my paypal account was attached to my checking account, so it was easily accountable. i understand there are big sellers with huge accounts they use or open new or other checking accounts for their business they are out there and that i can understand how that would be an issue. i never claimed ours since it was attached to our checking and the paypal debit card as well.( which we never used) it was all there in black and white and so little it really didn't matter.

we closed any "credit" card and listed them on our petition, but not the paypal account itself, just the card associated with it.

[Avand18]

Well, it sounds like the merchant accounts would be safe from these standpoints! I'll report and/or exempt whatever's in the PayPal balance at the time of filing, no problem there.

These accounts are a valuable "asset" to our business due to how busy they really are! We got our 1099-K for 2011 with $30,000+ in gross receipts. Funny part is after supplies, fees, shipping, and merchandise costs, we only pocketed about $2000 for the year, and that was quickly gobbled up by necessities. I only got to see about the same total amount from my paychecks, as about $68,000 went to the taxman or creditors. With a year that brutal, no wonder we're heading toward BK!

It's funny, you know! The whole point of having the PayPal credit was sabotaged by the rest of our unsecured debt, as you could imagine. When you buy auction lots on ebay, sometimes you don't have enough funds in the PayPal balance and have to spill over into your allotted credit balance or else you miss out on lots. Little by little your credit balances fill up and then you can't buy anything else and you're making payments on 26% interest. But I guess what's even funnier is that if things didn't cost so damn much there might actually be a benefit to having a small business!

I can't wait for a Trustee to request our business records. I'll warn him not to drop the binder of 500 pages / 6 months worth of eBay fees on his foot.

[tobee43]

Well, it sounds like the merchant accounts would be safe from these standpoints! I'll report and/or exempt whatever's in the PayPal balance at the time of filing, no problem there.

These accounts are a valuable "asset" to our business due to how busy they really are! We got our 1099-K for 2011 with $30,000+ in gross receipts. Funny part is after supplies, fees, shipping, and merchandise costs, we only pocketed about $2000 for the year, and that was quickly gobbled up by necessities. I only got to see about the same total amount from my paychecks, as about $68,000 went to the taxman or creditors. With a year that brutal, no wonder we're heading toward BK!

It's funny, you know! The whole point of having the PayPal credit was sabotaged by the rest of our unsecured debt, as you could imagine. When you buy auction lots on ebay, sometimes you don't have enough funds in the PayPal balance and have to spill over into your allotted credit balance or else you miss out on lots. Little by little your credit balances fill up and then you can't buy anything else and you're making payments on 26% interest. But I guess what's even funnier is that if things didn't cost so damn much there might actually be a benefit to having a small business!

I can't wait for a Trustee to request our business records. I'll warn him not to drop the binder of 500 pages / 6 months worth of eBay fees on his foot.

under your circumstances i can understand why you would be concerned. i don't think ebay or paypal will touch your account, but you certainly must list of course the 1099k. i'm certain your taxes reflect your costs of business and hopefully if you only had a net of 2k tax wise you'd be fine as well as for the bk.