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Is an overdrawn bank account dischargable with bankruptcy?

Miami, FL |

i have an overdrawn bank account and am wondering if its dischargable as the rest of my debts under chapter 7?

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Attorney answers 4


Actually, let's back up. Yes, the debt you owe to the "bank" on overdraft can be discharged in bankruptcy. I am going to outline the typical overdraw scenario (whether that is your case, is another issue).

Parties, (1) bank, (2) debtor (you) and (3) merchant (the entity the debtor made a purchase from).

Debtor buys $200 worth of stuff from Merchant. Pays by check.
Merchant submits check for payment.
Bank pays merchant.
However, by paying merchant, bank overdraws debtor's account by $150.00.
Freeze: At that point in time, the debtor owes a debt to the bank. The merchant has been paid, so NSF and bad check laws don't apply.

Most banks offer overdraft protection, sometimes tied to a savings account, a credit card, and oft times as a separate line of credit. And even if your account doesn't have OD protection, if the bank overdrew the account and paid the merchant, the bank made a "choice" and simply created a debt that the debtor owes to the bank. The bank could have simply not honored the payment. If the account has OD protection, that is a simple line of credit, just like a credit card.

It would actually be very rare for the bank (the deposit institution) to prevail on a fraud claim against the debtor (the bank had a choice to honor or dishonor payment), so yes, overdraft is dischargeable in BK. However, pull out all your money from that bank and don't expect to be able to bank there in the future.

Diane L Gruber

Diane L Gruber


If the check is returned by the bank to the checking account holder, THAT debt to the merchant is non-dischargeable.

Matthew Scott Berkus

Matthew Scott Berkus


Correct, if the bank dishonor's payment to the merchant (the person/entity who attempted to negotiate the check), then yes, the debtor would owe the merchant and that could eventually trigger bad-check laws. However, if the bank pays the merchant, but overdraws the account, then the debtor merely owes a debt to the bank.


Nope. NSF checks are cosidered fraud. Sorry.

Be sure to designate "best answer." If you live in Oregon, you may call me for more detailed advice, 503-650-9662. Please be aware that each answer on this website is based upon the facts, or lack thereof, provided in the question. To be sure you get complete and comprehensive answers, based upon the totality of your situation, contact a local attorney who specializes in the area of law that involves your legal problem. Diane L. Gruber has been practicing law in Oregon for 26 years, specializing in family law, bankruptcy, estate planning and probate. Note: Diane L. Gruber does not represent you until a written fee agreement has been signed by you and Diane L. Gruber, and the fee listed in the agreement has been paid.


Typically, the debt you owe to the bank would be eligible to be discharged, but if you are placed into Chex System & are unable to open a bank account anywhere, bankruptcy will not resolve this problem. Hope this perspective helps!


I vote with Berkus.

Posting questions anonymously and receiving general answers do not substitute for consulting with an attorney licensed to practice in the jurisdiction in which you live. Answers posted here by Kevin C Gleason are only intended for general education of the public on legal matters. Please consult a qualified professional before deciding what to do about your situation.

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