Friday, May 27, 2011

Bankruptcy and Paypal

Learn what I did about choosing a bankruptcy lawyer here, or skip ahead to find out about Bankruptcy and Paypal.
Wanna know what happens to your PayPal account when you file bankruptcy? I did and it was one of the few pieces of bankruptcy information that I couldn't find prior to filing.

I was very concerned about my PayPal account when I filed bankruptcy because I'd been selling on eBay for years and needed to be able to continue using my PayPal account or I wasn't going to have any money at all coming in. I also had PayPal Buyer Credit (not sure that still exists) through GE Money Bank.

I paid off the PayPal Buyer Credit account prior to filing because I didn't want it to harm the regular PayPal account. I also kinda wanted to keep my PayPal buyer credit. My bankruptcy attorney said I didn't need to but I was paranoid. Since the balance was under 600.00, this was not a preferential payment. However, paying that bill was like throwing that money down the drain since all my debts were discharged and GE Money Bank closed my PayPal Buyer Credit Account anyway.

In fact, they also added themselves to my creditor matrix (yes, even though I owed them nothing at this point) and this ended up delaying my bankruptcy discharge. I called them when they did this and tried to straighten it out but they wouldn't talk to me because of the automatic stay...I tried telling them that YES, they could talk to me because I did not owe them anything but it fell on deaf ears.

They said to have my lawyer call them but I didn't. (I should have but when you're in the middle of bankruptcy, things get overwhelming and sometimes you just don't want to deal with stuff, even though you should) Eventually someone at GE Money Bank figured out their mistake and they withdrew themselves from my bankruptcy. My discharge followed.

Anyway, I am happy to report that nothing happened to my PayPal account or my PayPal debit card. PayPal is actually a money transfer service, not a bank account.

Also worth mentioning is that the bankruptcy trustee never asked to see any PayPal statements or documentation, but I suppose he could have, so be ready to share that information if requested to do so. As long as you are doing everything on the up and up, you should have nothing to worry about.

And, as always, consult with a bankruptcy attorney to determine what needs to be done in your own, unique bankruptcy.

Wishing a fresh start to all who need it,



  1. Thank you for this! I was so nervous about filing since I depend on my PayPal account & debit card! Now I can file with ease.

  2. I'm so glad! Good luck with your fresh start!

  3. Unfortunately, I don't have a lawyer and can't afford one. I'm doing it myself. I currently have about $40 in my Paypal account. Do I have to declare it, and what will Paypal do? I too depend on Paypal for my freelancing work.

  4. Hi. I'm sorry for what you're going through. Plenty of people file on their own successfully, though. I am not a lawyer so don't construe this as legal advice, but I would think that this would be declared as cash - like money in the bank. I was never asked to produce any PayPal statements. PayPal isn't going to find out about your bankruptcy just because you have money in the account that you report as income.

    Good luck with your fresh start,

  5. great blog! i read it all as i am thinking of ignoring debt or doing chapter 7. paypal will find out as they check your credit often, i pulled my credit report the other day, and they seem to query mine 10 times a year!

    i sell on ebay fulltime, so quite worried about filing. i am judgement proof in texas, so they have nothing to 'take', so not sure about 7 or ignore.

    do you still sell on ebay and use paypal since filing or are you working?


  6. Thanks for the kind words. I do still sell on eBay, but not nearly as much. It's turned into mostly a buyer's market - hard to turn a buck there nowadays. I'm thinking of selling on Etsy - the fees are way cheaper.

    I'm surprised to hear that PayPal checked your credit - they are nothing more than a funds holding service; did they do a soft pull or a hard one? Do you have some kind of credit that carries the PayPal name? Curious.

    I don't know that I'd ignore my situation, even if I was judgement proof. I think that could come back to bite you in other ways (that's not legal advice..just an opinion)

    Anyway, love you hear back from you..but if not, Good luck with everything!