Cathy Moran is an excellent bankruptcy attorney in the San Francisco area. She maintains a great website called The Soap Box . She recently wrote a great article about how your bank cannot take money from your bank account to pay your credit card if you fall behind with your payments.
This issue comes up a lot with our bankruptcy clients, so I thought I would expound upon her article. As Cathy points out, the Fair Credit Reporting Act was enacted more than 40 years and this law still protects you from your bank taking funds out of your account for your credit card. Specifically, it is section SS169(a) prevents this ($$15 USC 166(h)
As the act states, your credit card issuer may not take any action to offset the debt you have on the credit card with funds you have on deposit with the bank. In the simplest terms, offset means that the bank can “offset” the debt you have with it, with the debt it has with you. When you have funds in the bank, the bank OWES you money. When you have a balance with the bank on your credit card, you OWE the bank money. So an offset allows the bank to offset the money it owes you (funds in your account) with money you owe it (credit card debt). This answers the question of whether or not Your Bank Take Money from Account to pay credit card?
To be clear, the bank CAN offset the money in your bank account with other types of loans like a personal loan or a car loan. The CANNOT offset the money in your account on a credit card.
Naturally, when you file for bankruptcy protection, you are worried that your bank will take or freeze the money in your checking account to cover your credit card debt with it. As Cathy’s blog post points out, the bank absolutely cannot do this (absent an agreement in writing, but then why would you sign one of those?) So don’t fear, if you file bankruptcy, your money in your checking account will be safe even though you owe it on a credit card.
If you owe the bank for a personal or signature loan, or owe for a delinquent car loan, you will STILL NEED to make sure that you have NO funds on hand in your checking and savings accounts when you file for bankruptcy protection. Our typical advice to new clients who owe their bank or credit union money for personal loans is to open a new account with a bank where they have no debts. This would not apply if you just have a credit card with the bank.
Be aware that even if the bank has the right of setoff against your funds, this right is not forever. Once you file for bankruptcy protection, the automatic stay goes into effect which prevent this from happening. However, if you have every tried to unwind a bank’s setoff, you know how much work it takes to get the funds returned. And all the while, the client is left without the money in her account. It’s not fun.
If you are wondering if these same rules always apply to credit unions, then see our next post. Credit Unions transact business a lot more differently than your national and local banks. The next article will make you realize that you REALLY need to read everything the credit union throws in front of you when you get a loan or credit card.
The law firm of Busby & Associates has helped thousands of people eliminate credit card debt owed to their bank. The question of whether or not a Bank take money from account is one we get a lot. This, among many other questions, that we answer daily for our clients. If you owe your bank money, don’t relay on your friends and co-workers for advice. Call our law firm today to see how you can protect your money.