As a bankruptcy attorney in Asheville NC, I counsel people who have tried to stop automatic bank drafts to a specific creditor but end up with more overdraft fees from their own banks instead. Last week, I met with someone who was charged over $300 because a draft they had already called their bank to stop was processed anyway. Read this New York Times story about how big banks may be involved.
The automatic draft is a debt collector’s favorite way to move money from your account to theirs. They often use pressure tactics or threats to get consumers to agree to the arrangements, or make it a condition of approving the loan. Filing a bankruptcy case will cause drafts to stop immediately because of the Court order which prohibits the practice called the “automatic stay.”
If you do not file a bankruptcy case, Federal Trade Commission rules say you can stop an automatic draft by contacting your bank in writing demanding that they no longer process automatic drafts. If you are under time pressure, the best thing to do is close the account which has the automatic draft attached to it. Put all of your money in a new account, and then follow up with your bank in writing about discontinuing the monthly draft.
If you have an automatic draft set up with a collection agency, it is a clear sign you should contact a professional for help. When money in your budget is tight, bankruptcy exemptions can protect certain property you own whether you file a bankruptcy case or not. If you live in Western North Carolina, contact me to schedule a free bankruptcy consultation in my Asheville office.