Key bank said Bankruptcy Doesn't apply to them

[destitute]

I filed chapter 7 on July 24th and listed Key bank in my creditor matrix. I have a $500 overdraft account with them. I used to have a checking account with them as well but closed it before filing since I was worried they would take the money out of it to pay part of the overdraft.

In the middle of August I received a letter telling me that my checking account was overdrawn. When I called to find out what happened they took a payment of $1.50 (I have no idea why) from my closed checking account and applied it as a payment to my overdraft account. They also charged me a $32 NSF fee for the privilege. I called customer service and told them the account had been closed so how could they take money from it? She said that the account was frozen but would not be technically closed until the overdraft was paid off. I advised her of the Bankruptcy and tried to give her the case number but she said "your bankruptcy does not apply to us". I couldn't believe it. I said "Are you telling me I owe you money?" and she said yes. I responded with "That would be a debt then and bankruptcy applies". She then asked where she could reach me after she researched the issue and I told her she can't call me and I have her the name and number of my Attorney.

My attorney then sent their "nastygram" letter to Key with a copy of the BK Filing notice. Today I go get my mail and what do I find? A letter from key bank demanding payment on my overdraft and threatening a negative report to my credit. I know they are aware of the BK because when I called customer service they said they couldn't talk to me because of my BK.

I spoke with the attorney's office this afternoon and they are sending out letter number 2 which they affectionately call the "Come to Jesus letter". If Key does it again my attorney is going to file with the court and ask for sanctions.

I wish I could say I am upset but actually I'm laughing at their stupidity. I thought you all might enjoy this little story too.

[catleg]

Key to Stupidity

This is pretty funny. They did a transfer FROM a closed account TO a defaulted account INCLUDED in a bankruptcy WITHIN their own institution and have the nerve to charge an NSF fee and try to collect on it IN VIOLATION of the automatic stay.

I would love to see the judge's face when he sees this one. Be sure to spell it out very clearly for your lawyer. This should be fun.

[IBroke]

What's funny is that they recognize your BK when you want to talk to them ("sorry, we can't, BK applies") - but they still send you "collection-letters"...

IMO, that's a "CAN'T DO.."...

[AngelinaCat]

It sounds like the Right hand doesn't know what the Left hand is doing--or cares!

I agree, this ought to be fun to watch.

[optimistic1]

Yes they are very stupid. Overdraft line of credit is most definitely dischargeable.

[Bell30656]

Keep in mind that they will still report you to Chex System for the next five years. Let your lawyer deal with it after all that is why you pay him/her the money. Some (namely in the banking industry) would argue that an NSF check is a criminal matter and can still be collected via misdemeanor restitution after the filing of charges. Of course, they would have to produce said check to be able to do that.

[destitute]

It's not an NSF check. The account was closed with a 0 balance and they debited it to pay the overdraft. They created the situation so I can't see how I can be held liable.

My attorney's office contacted them today and after getting the runaround they told her that we filed bk on the overdraft but not the checking account. That excuse doesn't fly because the checking account was closed AND the most recent collections letter was on the overdraft account which they admit to have in their BK department. Also, the account number for the checking account is the SAME number as the overdraft account. They're just playing games.

My attorney sent another nasty letter to the telling them to C&D. She says if I receive one more collections letter she's going to petition the court for sanctions. These guys have been such idiots I'd almost love for them to screw up again just to watch the fireworks.

[catleg]

Yes I was speaking generically, since banks have adapted to the new electronic landscape by applying the same penalties that applied to physical processing of checks, when they have no handling costs at all in processing electronic credits and debits.

One of the more amusing observations that I made before all my credit cards defaulted was regarding Amex's risk tolerance regarding overlimit charges. I had a card with about a $3500 limit. When I was close to the top, a charge of about $200 would be declined, but a charge of about $100 would be approved, since they could then "earn" a $39 overlimit fee (optima card, blue cash). So they were willing to "risk" a loss of an extra $100 in exchange for the opportunity to "earn" a $39 penalty, which presumably is paid most of the time.

Banks accounts are an even worse deal for consumers because the bank is almost always able to capture the penalty money out of a subsequent deposit, except when they hit you with like 7 penalty charges and you close the account. Then it goes into collections and I imagine their recovery rate is not so great.