People dealing with financial difficulties often believe bank overdraft protection is a blessing, allowing them to make necessary payments and avoid embarrassment when their account lacks sufficient funds. Sometimes, individuals only need this type of relief for a day or two, until their next paycheck hits. Unfortunately, these shifts in funds can result in hefty fees that accelerate a downward financial spiral. 

While overdraft protection might sound like a safe, comfortable backup plan, it actually is a form of credit issued by a financial institution. Still, many prudent people who are wary about making purchases on credit don’t grasp the potential risk in the accumulation of overdraft fees that can have the same effect as going on a shopping binge with a maxed-out credit card. 

The compounding effect of multiple overdrafts and associated fees can quickly snowball into unmanageable debt, pushing individuals further into financial distress. While there are instances where overdrafts are isolated occurrences, a study showed that about 70 percent of overdrafts reflect that the account owner has more serious credit accessibility issues. As overdraft fees accumulate, individuals may resort to borrowing from high-interest payday lenders or using credit cards to cover expenses, further increasing their debt load. Eventually, the weight of these financial obligations might become unsustainable.

Continuing the cycle of negative balances and punitive fees is not a recipe for the stability you seek. A knowledgeable bankruptcy attorney can examine your situation and develop a long-term plan for financial relief. This might include filing for bankruptcy, which would put an immediate halt to creditor harassment and provide a legal framework for restructuring or discharging debts.

For many people, the best thing about bank overdrafts is that they are basically silent transactions between themselves and their bank. This means no embarrassment at a checkout counter, but the consequences down the road could be much worse. It’s critical to remember that bankruptcy should not be a source of embarrassment, but is properly regarded as a program specifically for people who deserve relief and security despite unfortunate circumstances.  

The Law Offices of James C. Zimmermann advises New Jersey clients on a full range of bankruptcy and debt relief issues. To make an appointment for a free initial consultation, please call 973-764-1633 or contact us online for a free consultation to learn about how we can help. Our offices are in Vernon, Wayne, Pompton Lakes, Hackensack and Nutley.