A fresh start in bankruptcy depends on your being able to survive financially after your debts are discharged. You must be able to pay all of your living expenses out of your net household income and be able to take steps to improve your credit score to get it back above 700 (at least). But some employers have been engaging in an activity that would make the process needlessly more difficult.
What are they doing? They are paying their employees using debit cards. As CNBC reported on October 2, many employers, especially those in the fast food and retail industries, have been putting payroll checks on debit cards.
This resulted in complaints by employees to the federal Consumer Financial Protection Bureau about high and unexpected fees for routine transactions, such as checking the card balance and withdrawing cash.
So Why Is That a Problem?
This is where the first obstacle to a fresh start is presented. People struggling post-bankruptcy have to find ways to live within their means. If they are forced to pay these fees, that means less money to pay their bills. For those living on the financial edge, making barely enough to survive, this method of payment can make a big difference!
The second obstacle is that it prevents the employee from using a credit card (responsibly) to improve their credit score. Increasing your score means obtaining new credit and using it responsibly with timely payments over the long haul. But this is not possible as long as the money remains on the debit card; it must be transferred to your bank account first, and there are often bank charges for that.
So What Do I Do?
Payroll debit cards can be an advantage to many people, but those picking up the pieces after a bankruptcy can be particularly vulnerable. If you are trying to survive post-bankruptcy and your employer wants to give you your paycheck in this manner, you have rights.
The Consumer Financial Protection Bureau has mandated that employers cannot pay employees solely by debit card, and even where they do, employees have certain rights in that regard. You can tell your employer that you want your wages by direct deposit or paper check (or any method mandated by your state's laws). With more control over that money, you can avoid bank fees and work more effectively to rebuild your credit.