Should I Use A Debit Card Right Before Bankruptcy?

“Should I use my debit card right before I file bankruptcy to pay for necessary expenses?”

The better answer is yes you can do that. Under Federal Electronic Payment laws the payment on a debit card is considered an immediate cash transaction that the creditor can rely upon even though the transaction maybe not settled until a day or two after you actually swipe the card.

Under federal law it’s the swiping of the card that constitutes a transfer, so that the vendors and merchants are protected in the event that something goes wrong with the debit card later on. This is important because under federal bankruptcy law a transfer typically occurs when funds leave the debtor’s bank account.

If that happens post bankruptcy the trustee can grab that money because it was property of the bankruptcy estate as of the time you filed the case, so that’s why writing a check is a little different because a writing a check the transfer doesn’t occur until the check clears the bank, but a debit card is different it’s an electronic transfer.

It’s protected by a different federal statute and you should be safe if you use a debit card immediately before bankruptcy.