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An Update on Erica Stevens

posted by Debb Thorne

Back on February 24, I posted the story of Erica Stevens (again, not her real name). Erica is one of the respondents of the Consumer Bankruptcy Project 2007. I described how her bank had held a check from the bankruptcy study for five days, without telling Erica, thus causing a couple of her checks to bounce---to the tune of $33 per check. In our outrage over the way Erica was treated, a couple of us who blog here on Credit Slips volunteered to contact her bank on her behalf (with no charge to Erica whatsoever). The objective was simply to attempt to get the charges reversed. When our interviewer, Denise McDaniel, called Erica with the offer, her reaction surprised us.

Erica refused our assistance---out of fear that the bank would retaliate against her. She told Denise that when she and her husband filed for bankruptcy, their attorney insisted that a couple of loans from this particular bank be included in the petition. (Which, of course, they had to be.) She said that she believes that the bank has been particularly harsh with them and has singled them out since they filed.  Thus, she does not want to risk angering them with our calls. She can't afford to make them mad.

And Erica recognizes that it might be in their best interest to change banks, but since her husband's paycheck is automatically deposited into this bank, she's afraid that things would get messed up in the transition and they would be hit with additional charges and fees. Which is something that this couple truly cannot afford.

In February, when I first posted Erica's story, there were several readers of the blog who responded. Their comments strongly suggest that this type of financial mistreatment is quite common. Indeed, I would encourage you to take the time to read what they had to say. And if you are an academic looking for a new research project, well, this would make a great topic!

In sociology, we often weigh the power of individual agency against the power of social structure. In this case, it would be the power of Erica against the banking industry. Clearly, the playing field is not level. Once again, I assert that for real change to occur, government leaders need to take a stand against the banking industry, hold them accountable for their abuse of consumers, and give some power back to the people.

Comments

Simple answer for Erica:

1. Open an account with a new bank.
2. Have her husband change his direct deposit.

Upside: no fear of retaliation.
Downside: it will likely cost more (cost of new checks, for example) to change banks than she would get back. And, if banks discriminate on accounts based upon credit ratings, she will have a problem. On the other hand, if she were willing to change banks (and maybe go to a credit union), the new bank might be willing, in exchange for her business, to give her a couple of hundred checks.

Retaliation, is a good reason to file an Adversary for violations of the Automatic Stay or Discharge.

Personally I like to keep my loans and my banking separated and in the BK context sometimes you have to tell the debtors to switch banks before they file if they have loans and direct deposit at the same bank. Credit Unions are notorious at freezing bank accounts after filing. Ya... its not legal because of the Automatic Stay but it does not stop them a lot of the times and you will end up having to petition BK court to release the funds... Then they may bring up "Cash Collateral" , sometimes the Credit Unions may require you to maintain certain amounts in a savings account if you are to get an unsecured or secured loan. Also you have to look out for situations concerning how the Credit Unions classify the loans you do have with them. ie. If you have a secured and unsecured loan with a Credit Union, they may be cross- collateralized. A lot of people I talk to have this and they do not even know it.. Moral of the story….. If you are going into Bankruptcy it may be best to separate you banking from your loans before you file. Consult your Attorney for best results…. Its all about pre-planning….

I am a consumer/small busniess bankruptcy attorney in Austin, Texas. The banks we have the most problems with are Bank of America which will make you close your acccount if you discharge their credit card and Wells Fargo, which will not only freeze your bank account, but your IRA as well. Their argument - until the exemtions are allowed, those funds technically belong to the estate. true, but read 362(a)(3) which operates as a stay of any act to "exercise control over property of the estate." Freezing the accounts (and the IRA) sure sounds like exercising control to me.

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