By Larry Karandreas Before my clients file a Chapter 7 or 13 Bankruptcy, I often instruct them to stop automatic withdrawals from personal bank accounts for payments to creditors. Many times my clients are unaware of their rights with respect to such withdrawals and sometimes the banks do not make it easy for them to stop such payments. The Electronic Funds Transfer Act does provide some assistance and protection for people who wish to stop these automatic withdrawals.
Under the Act, you have the right to stop an authorized electronic funds transfer up to three days before the transfer is scheduled to take place. To do this, you must contact your bank to have the transfer to the individual creditor(s) stopped. While you can do this verbally, I often find that it is better to go to your bank and give them a written notice AND verbally tell them not to make any further electronic transfers to a particular creditor(s). Keep a copy of that notice. You may have to repeat this process three days prior to the next scheduled payment (if you choose to remain at that particular bank.) I also advise my clients to send a written notice to the creditor telling them to stop all electronic funds transfers.
This is all fine and well and should work, but sometimes it does not. In the event that the creditor succeeds in having funds transferred to them, you have certain rights against your bank if they allow the funds to be transferred after you have given them orders to stop.
Once you notify the bank that an unauthorized transfer has occurred ( I would do this in person and give them written notice) they must initiate an investigation and advise you within 10 business days of the result of their investigation, and, by day 11, they must credit your account with the amount that was erroneously transferred. If the bank does not credit your account, you have the right to sue them for the money taken out, plus any fees charged, plus a penalty ranging between $100 to $1,000 (and they also have to pay your lawyer.) If it is shown that the bank acted in bad faith, they can be found liable for triple the amount of damages.
Knowing your rights will go a long way toward preserving your sanity and your money. Seek the assistance and guidance of an experienced Chapter 7 and Chapter 13 bankruptcy attorney. You have nothing to lose but your debt.