Negative PayPal balance

I stupidly sold some digital goods without realizing PayPal offers no protection for them. Long story short I got scammed, the buyer got a refund and the goods, and I now have a negative balance on PayPal. I had given most of the money to a friend, and I don't have enough in my bank account to pay the balance. How does PayPal get their money back? Are they going to take it from my friend? Any harm in just closing my bank account so they don't take it from there?

 

You're SUPPOSED to have protection but yeah, for digital goods, they infamously don't really look into disputes or claims regarding digital goods. No matter how much evidence you have, they usually end up just giving buyers their money back and hitting you with a nice refund fee on top of whatever they return to the buyer.

As for PayPal taking money out of your bank, they cannot touch your bank without your permission. It depends on how much you owe them but they'll do an assessment to see if the amount is worth chasing down. More than likely, they'll send it to collections and you'll have a collection agency calling you all the time. It will put a negative impact on your credit score more than likely. They probably won't pursue any kind of civil suit unless we're talking thousands of dollars and even then, they have to deem that it's even worth going after in a civil case.

Quick side story: I called them back in 2011-2012 to pay off a $200 debt. I told the person who answered I wanted to pay off the debt, so that representative marked my debt as paid then told me I needed to be transferred to the right department to pay the debt. Once a new person picked up the phone, they said it looks like I already paid off the debt, I agreed and that was it. The day that PayPal literally screwed themselves out of $200 that I was actually ready to pay off because someone marked a debt as paid. Yes, they are that mismanaged.