Overdraft Loan Account

[RickInMich]

Hi,

I have an overdraft loan account that I previously used just about every month. In other words, if I don't have enough funds in my checking account, my overdraft kicks in and covers the check that would otherwise bounce.

Anyway, I think in September I ended up using about $700, which is the current balance today. The thing is, that amount was used to pay my credit card bills that month. I really would like to pay that off before filing in the next couple weeks. My quetsions are:

1. Paying that would obviously look like a preferential payment. But if the day I run the credit report to give my attorney the balance shows zero, do I need to report that amount? Do trustees or whoever look at past credit reports?

2. If I include that 700 in the BK, will that affect my chances of getting other checking accounts? I mean, it's technically a credit loan, but it's to cover my checking account.

I've stayed current on all payments (for less damage to credit report), so I've technically made preferential payments to all my creditors. I think all of them will have been paid over $600 in the previous 90 days. So maybe it wouldn't matter if I paid the $700 on this one.

Any advice is appreciated.

Rick

[WantToBeDebtFre]

I think it would count as a preferential payment. I was going through the same thing. What I had to do was pay off the overdraft and then I waited 90 days. I stopped paying my credit cards at that time which allowed me to stop overdrafting my account.

If you don't wait 90 days and the trustee catches it he could make that creditor pay back the money to the trustee and then I think they would have to be included in your bankruptcy. Since I really wanted to keep my bank account out of the bankruptcy I didn't want to take a chance of this happening so I waited the 90 days.

[lrprn]

Rick, why do you want to pay off an unsecured debt like your overdraft account? It can be included in your bankruptcy and wiped out. Just change banks before you file.

[demismom]

Just change banks, we did. It would be a preferential payment, yes. I would do it before you file though.

[RickInMich]

I know this is ridiculous, but I've been with this credit union for about 25 years. I was hoping maybe to stay with them.

But really the bigger question I had was, would that affect my ability to get a checking account in the future from other banks. I do have another credit union that I'm going to be doing all my banking with now. But I was just wondering if that overdraft account is more in the realm of like bouncing checks, or would it be more like a credit card.

Plus, I think the bulk of those transactions won't be 90 days old.

Rick

[HHM]

However, so what if it is a preferential payment...preferential payments do not effect the debtor.

Overdraft is a line of credit...so it's more like a credit card. Overdraft accounts are general unsecured debts.

[demismom]

I'd been with the same bank for 20+ years myself and discharged my OD account AND a credit card with them. I didn't want to take the chance that they would voluntarily close my accounts with them and report it to the Chex System and then I'd be screwed in getting an account, so I got one before I filed.

[WantToBeDebtFre]

I know this is ridiculous, but I've been with this credit union for about 25 years. I was hoping maybe to stay with them.

But really the bigger question I had was, would that affect my ability to get a checking account in the future from other banks. I do have another credit union that I'm going to be doing all my banking with now. But I was just wondering if that overdraft account is more in the realm of like bouncing checks, or would it be more like a credit card.

Plus, I think the bulk of those transactions won't be 90 days old.

Rick

I want to stay with my bank too which is why I paid mine off and then waited 90 days. I know it might sound strange to some to pay off a debt like that but I get all my auto insurance, life insurance, etc and awesome benefits from my online bank and don't want to lose my membership with them.

[lrprn]

We also had been with our beloved local bank for more than 20 years - car loans, home improvement loans, all paid off before we got into financial trouble. However, I knew that with $3,000 on our overdraft account in our bankruptcy, it was in our best interests to change our checking account to another local bank before we filed, so we did.

Our beloved local bank (which also held our HELOC) promptly bumped the interest on our HELOC 2% - they are not so beloved now. And we really like our new local bank - they've been great!