Bank Account Linked to Credit Line

[SNC]

I am filing for Chapter 7 (petition date will hopefully be this Friday).

I opened up a new checking and savings account at a new bank in order to avoid having my old bank taking my checking account funds to pay off my debt that is due to them (a $900 balance on an overdraft protection account). However, my old bank will not allow me to officially close my checking account with them due to me owing them debt. If I go ahead and "zero-out" my checking account funds with my old bank, and keep the account open, I am afraid that they will make my checking account negative with the approx $900 I owe them once they learn of my bankruptcy... My minimum monthly payment is $20 with them, so maybe they would, on a monthly basis, continually make my checking account negative by $20.

Would love anyone's input on how to handle this...

[SMinGA]

Its irrelevant. Whether you owe them $900 for an overdraft line of credit or $900 for a checking account, you still owe them $900 and it would still be included in the ch. 7 / discharge.

After filing, they can't make any efforts to collect. The automatic stay is in place for that reason.

[SNC]

But I heard that if you leave a checking account open with a bank that you have a debt with, they can take that money out of your checking account once they find out that you are filing bk so that they can get their money.

[SMinGA]

If you have funds in an account at time of filing - they can freeze it for right of setoff. Not the same thing. $0 balance, they can't do anything to you. Just followup with them after discharge to confirm they close the account then. (You'll no longer owe them anything.)

But I heard that if you leave a checking account open with a bank that you have a debt with, they can take that money out of your checking account once they find out that you are filing bk so that they can get their money.

[SNC]

So by "freezing it for right of set-off", you mean that they will just freeze my checking account once they find out I'm filing bankruptcy, and then close my bank/checking account with them (instead of keeping the checking account open after bankruptcy and making the checking account negative)?

[SMinGA]

Yes, the potential for them to freeze it is the problem. Especially if you have $ in that account (intended for bills, groceries, etc.) or still have your direct deposit going in.

So by "freezing it for right of set-off", you mean that they will just freeze my checking account once they find out I'm filing bankruptcy, and then close my bank/checking account with them (instead of keeping the checking account open after bankruptcy and making the checking account negative)?

[SNC]

So I should be fine then as long as I "zero-out" my checking account with them? After and during my bankruptcy they cannot keep the checking account open and make it negative with the credit balance I owe them, correct?

Thanks for all your help!

[epiphany]

So I should be fine then as long as I "zero-out" my checking account with them? After and during my bankruptcy they cannot keep the checking account open and make it negative with the credit balance I owe them, correct?

Thanks for all your help!

Yes, that's correct. I had an overdrawn checking account discharged in my bankruptcy. They cannot legally try to collect anything once they are notified of your bankruptcy, and as SMinGA said, any debt you have with them will be discharged through the bk.

Were I you, I would zero out that account today.

Good luck,

ep

[ldm]

I have a similar problem, but use the line of credit regularly. I pay off the debt at the beginning of the month when paychecks go in and through the month take advances from the line of credit to pay for things from checking account (groceries, bills, etc.). I do this to decrease the amount of interest I end up paying. I will have to file bk unexpectedly and have been using this account regularly. Will I need to stop using for 70 or 90 days before I can file? Or if last month the difference between the amount I paid towards the credit line was only $350 less than the amount that I was advanced, will I be able to file 70 to 90 days from the first of last month? Has anyone filed on a line of credit like this? Any advice would be great!!! Thanks!