Question RE: Charges on a Debit Card

[ld2366eh]

Hi! We are filing in October and we have our intake meeting next week.

We have been using our debit card for purchases since January of this year. Most of our credit cards have not been used in 2-3 years, with the exception of a couple that were used through January of this year. We had a baby in May and bought a bunch of things for the baby as well as a couple of other purchases over and above "reasonable and necessary" on our debit card. My question: will this spending be looked at negatively by the trustee when we file? My attorney told me not to worry about it - that most of it was explanable, but I just feel like this might mess us up for filing in October. Plus, they only know I made purchases, they haven't actually seen our bank statements yet! Gas and groceries alone look rediculous! Trouble was, we are behind on our mortgage so that hasn't been paid (they wouldn't accept the payments even if we tried...) along with the rest of the credit cards, so I've been trying to keep my cash balance to a minimum, by spending it on things we "need". Has anyone else out there been in this situation? I'll find out for sure next week when they review my 6 month supply of bank statements, but I wanted to be prepared for the worst...

thanks!

[frogger]

My question: will this spending be looked at negatively by the trustee when we file? My attorney told me not to worry about it - that most of it was explanable

thanks!

You're paying your attorney to worry about this, so let him earn his money. He's basically already told you that this is no big deal, so listen to him!

Chill grasshopper.........

[ld2366eh]

Of course you are right. I'll try not to worry about it!!! Thanks!

[MarkCantaur]

Once you turn in your bank statements, they will be given the once over and that will be that. You won't have any problem, especially with a new baby.

[ld2366eh]

I hope you are right! Thanks!

[bcohen]

I don't understand why you are worried at all about purchases made on a debit card prior to filing. It is my understanding that you can spend your own money however you see fit--even on luxury goods--prior to filing, and the worst that can happen is the trustee tries to take the goods if they are non-exempt, and if the dollar value is high enough to justify this. Anything you might (reasonably) have purchased for a baby would be exempt, and also would be worth so little that the trustee would not bother you over it even assuming it was non-exempt. Now if you had purchased a $3000 diamond ring prior to filing, then you might find yourself asked to surrender it to the trustee.

Now with regard to your credit cards, if the last time you used them was in January of this year, the lookback period for "presumption of abuse" is over, and the likelihood of an adversarial proceeding is almost nil.

You have nothing to worry about.

[AngelinaCat]

A debit card can be used as both a debit card AND a credit card.

It is actually a tiny bit safer to use the card as a 'credit card' rather than a debit card. The reason being--at least according to what I hear on Consumer Advocate, Clark Howard's radio show--is that you can contest an erroneous charge if you used the Charge side. If you used it as a Debit, and you made an error, or worse--the card was stolen--that money is gone, gone, gone.

Gee, I can hear Clark's voice in my head even as I typed that. Good luck to you

[kornellred]

To say that a debit card can also be used as a credit card is only to say that a charge can be processed without entering a PIN number. That's all. The bank account to which the debit card is associated might have overdraft privileges, in which case the bank will charge you an arm and a leg if you do actually use the debit card to purchase something which exceeds your bank balance. A debit card is simply a cash substitute.

[ld2366eh]

Yep! Easier than writing a check and I don't have to wonder where all the money went!

Thank you all! I guess I was worried that the trustee would wonder why I was spending money rather than paying my bills, but I'm not paying my bills because I can't afford to pay all of them, hence the bk coming up!

[AngelinaCat]

Keep in mind that you may be using your debit card to pay some bills. I have an HSA--didn't exist during our BK, it came after--and there is a credit/debit card that I use to pay my copays, doctor bills, etc., and some of these are paid online or over the phone.

[ld2366eh]

We also have an HSA account for medical. I can only use it to pay medical expenses. How is this handled for the BK? We have about $600 in the account right now. Do I need to exempt this $ or trustee can take it?

As far as my other debit card is concerned, it's got a VISA logo on it, but it's just linked to my bank account. I use it for everything (like I used to use my American Express for). Since it's my bank account, I still write checks and withdraw cash as well, but I use the debit card as "credit" when I go shopping, get gas, etc.

[ksgirl38]

A debit card can be used as both a debit card AND a credit card.

It is actually a tiny bit safer to use the card as a 'credit card' rather than a debit card. The reason being--at least according to what I hear on Consumer Advocate, Clark Howard's radio show--is that you can contest an erroneous charge if you used the Charge side. If you used it as a Debit, and you made an error, or worse--the card was stolen--that money is gone, gone, gone.

Gee, I can hear Clark's voice in my head even as I typed that. Good luck to you

Correct, that's why I always use mine as a credit. I often wonder if the credit transactions take longer to go through too. I often see mine pending on my checking account longer than a debit transaction, but that could just be my bank.

[ksgirl38]

We also have an HSA account for medical. I can only use it to pay medical expenses. How is this handled for the BK? We have about $600 in the account right now. Do I need to exempt this $ or trustee can take it?

As far as my other debit card is concerned, it's got a VISA logo on it, but it's just linked to my bank account. I use it for everything (like I used to use my American Express for). Since it's my bank account, I still write checks and withdraw cash as well, but I use the debit card as "credit" when I go shopping, get gas, etc.

I remember listing my HSA account in my attorney's questionnaire, but I don't remember it coming up again. Of course, I only had less than $400, but it's probably not that big of a deal. Just in case you could always refill any prescriptions ahead a time and stock up if you were afraid you'd lose it. Does anyone know if that's exempt?

[ld2366eh]

I don't think I've ever used my card with the debit function unless I am at the ATM machine. I always choose "credit". Sounds like that is a good habit to have! Thanks again everyone!