I've heard this mentioned when filing BK...but why?

[chmastal]

I've heard this mentioned - to stop direct deposits of your paycheck before filing, but why?? I've established a new checking account in a new bank (credit union), I didn't get any credit cards with them - no, no, no! Is my pay at risk by having it direct deposited???
Hope this question doesn't sound stupid - I just need to know if this is something I really need to do to protect myself when I do file, I'm just not sure why.
Tks

[confusedinVA]

This is because on the day that you file, whatever money is in your checking account belongs to the trustee. Regardless of the bills you have to pay with it.

[JusticeForAll]

Well, the non exempt part of it anyway.

[9877donna]

I've heard this mentioned - to stop direct deposits of your paycheck before filing, but why?? I've established a new checking account in a new bank (credit union), I didn't get any credit cards with them - no, no, no! Is my pay at risk by having it direct deposited???
Hope this question doesn't sound stupid - I just need to know if this is something I really need to do to protect myself when I do file, I'm just not sure why.
Tks

Just be sure on your filing date that you have the least amount of money in your account as possible.If you can file your petition on a day that your account has little or no money in it that would be a good idea.
Donna

[lrprn]

I've heard this mentioned - to stop direct deposits of your paycheck before filing, but why?? I've established a new checking account in a new bank (credit union), I didn't get any credit cards with them - no, no, no! Is my pay at risk by having it direct deposited???
Hope this question doesn't sound stupid - I just need to know if this is something I really need to do to protect myself when I do file, I'm just not sure why.
Tks

Not stupid at all - you've asked a very good question. Stopping direct deposits temporarily may be a good idea in two situations - (1) when your automatic deposit is going into an account at a bank or credit union where you also have unsecured debts (overdraft account that has been used, credit card, unsecured loan, etc) that will be included in your bk. This is to prevent the lender from taking the automatic deposit to pay for the unsecured debt; and/or (2) to ensure that you have as little in your account as possible on the day you file. Our lawyer said to aim for having less than $500 total in our accounts on the day we file. We managed that by planning ahead to file on the day before our automatic deposits hit our account and also by paying our regular bills and utlities a bit early to ensure they would clear our checking account before filing day.

It isn't always necessary to stop automatic deposits - just depends on your personal situation. Hope this helps clarify!

[GoingUnderInNV]

It's a good idea, for reasons stated above. I stopped my direct deposit a couple months before filing, and have been keeping only enough money in the account to pay bills online. My only real reason for doing that was to prevent a seizure of my account because of a possible arbitration award, more so than for bankruptcy reasons.

However, on a related note, my attorney told me that if I have less that $500 in my account the trustee really wouldn't bother with it. All the same, I try to keep only around $100 in it at any one time. Once the bankruptcy is over with I'll start direct deposit back up again.

[CAB_44]

My attorney hasn't said a word about this sort of thing....
So, is this through the entire BK that you have to keep out the money....or just when you file?
We moved our account to another bank. Our attorney suggested that we move our account to another bank in which we did not owe on any loans, which is what we did....
But I was not under the impression that the trustee would or even could garnish your personal account....good grief, how is that legal??????????
If they take out your money in YOUR account how in the hell do they expect you to pay bills???????? This just doesn't even make sense to me at all....
anyone????????

[SinkingFast]

Most likely, CAB, your attny will be able to cover a small amount of cash that's either in your bank acct, or on hand, with some sort of Exemption you may have.

It's when you have larger sums that are not covered by an exemption, that the Trustee can sieze the funds in your bank acct.

There have been people come here and post they had thousands of dollars in the bank the day they filed and were surprised the Trustee took their money.

[CAB_44]

I see.....but I figure if I had thousands of dollars in cash at the bank, that would consitute fraud.....in that case of course I could see how it would be seized.....however, if there is a deposit of say 2500. and that is from a pay period....they sure as heck better leave it alone....that's what I will pay my bills with.....I would kick and scream if they took that bi-monthly deposit out of my account when it was going to pay my mortgage, and vehicle payments,utilities, groceries...etc...etc......but~ I usually pay those immediately and there isn't much left....even after a few days......paycheck to paycheck.......

[SinkingFast]

It has happened to other folks, CAB. Where they file on payday, or a day or 2 after payday. Their paychecks are in the bank with checks floating around to pay bills. Either they or their attny doesn't cover the pay with an exemption and the Trustee siezes the filer's bank acct.

I remember someone recently had done some sort of home equity LOC deal where they had several thousands of dollars left over, sitting in the bank when they filed, and no exemption to cover it. That poster filed pro se, didn't think twice about the money in the bank, and the Trustee took that cash.

Timing is key when filing BK. And so is application of exemptions.

[lrprn]

I see.....but I figure if I had thousands of dollars in cash at the bank, that would consitute fraud.....in that case of course I could see how it would be seized.....however, if there is a deposit of say 2500. and that is from a pay period....they sure as heck better leave it alone....that's what I will pay my bills with.....I would kick and scream if they took that bi-monthly deposit out of my account when it was going to pay my mortgage, and vehicle payments,utilities, groceries...etc...etc......but~ I usually pay those immediately and there isn't much left....even after a few days......paycheck to paycheck.......

The situation SF describes happens when there is suspicion of fraud or when there are debts owed to the same bank the direct deposit account is in. Since you changed banks and are not filing fraudently, this won't be an issue for you.

But do understand that there have been rare cases like the ones SF and I have been describing where a direct deposit went into an account that was needed for bills - in some cases the bills had already even been mailed. The trustee or bank took the money anyway and left the debtor to deal with the overdrafts and late fees.

Keep in mind that filing bankruptcy is a financial decision. There's no emotion in it for the lawyers, trustees, and court - it's the law - and unfortunately, sometimes no fairness either. On the day you file, you give up all control of your finances to the trustee and courts, and he/she/they can do whatever they need to do to provide as much money as possible for your creditors within the law.

[CAB_44]

okay~
so do I have to ASK my attorney for an application of exemptions so our next deposit isn't wiped out by the trustee??
We will file this next Wed. ~ the legal assistant said the papers would not technically be filed until Fri. and the next pay day is Oct.5/6 ....
I will need to pay my mortgage with that deposit.....
I'm getting more and more nervous......

[lrprn]

okay~
so do I have to ASK my attorney for an application of exemptions so our next deposit isn't wiped out by the trustee??
We will file this next Wed. ~ the legal assistant said the papers would not technically be filed until Fri. and the next pay day is Oct.5/6 ....
I will need to pay my mortgage with that deposit.....
I'm getting more and more nervous......

Relax, CAB. You said you already opened a new checking account at a different bank for your auto-deposits and you don't have any other owed debts at this bank.

Now if you had $5,000 in this account on the day you file, that could cause some potential problems. To avoid that, you need to plan ahead to file on a day when there's less than $500 in your accounts. After the snapshot of your finances is taken on the day you file, after that the trustee isn't likely to bother you or your accounts unless some suspicion of fraud pops up before your 341 meeting or before discharge.

[SinkingFast]

Don't worry about it, CAB.

What we've told here is things that have happened to people and things that CAN happen.

We filed on Thurs with a whopping $18 in the bank. The paralegal said to print out our online statement through that day. Tuck it away and bring it to the 341 with us. Give the printed statement to the attny at the 341. Someone else here said they did the same thing. Printed out their online banking statement up thru filing day and turned it over at the 341 also.

The very next day, Friday, was pay day. I took Hubby's paycheck to the bank just like normal. I've since gotten the Cashier's Check to pay the rent, AND bought groceries, got a Money Order to pay insurance, and paid for Priority Postage at the Post Office all on my Debit Card. Hubby's bought gas on his Debit Card as well. Not one problem with our checking acct.

Just be mindful of the problems a few people have had and know what you need to do to avoid the same pitfalls.

[CAB_44]

I understand...
LOL, SF~ I'm glad to see someone else's bank account looking like mine....I've had LESS than 18.00 in checking........
We do have direct deposit with both husbands paychecks...but filing will be before that.....and like I said~ the money that's gonna be in there is to pay bills...not much left over after that.....that's for sure~

I am frazzeled today~ watching my son's bulldog pup......he's wearin' ME out.........I have two dogs, and they all have just been little rats today.....now he's SNORING under my chair at the computer...... uuuuggghghhhhhhhhhhh......my nerves are shot!!!!! hahahahahaha~

glad I got this straight though~ thanks all for your help as always!!!!!!!!
CAB