Friday, September 16, 2011

Why you should consider switching Credit Unions before filing bankruptcy.

Many people prefer to do their day to day banking at local Credit Unions. They find that many times they receive more personal service, and enjoy being a member of a banking institution rather than simply a customer.

Credit Unions are usually great to bank with. But, when you file bankruptcy some debtors receive a very unwelcome surprise.  Under certain circumstances a bankruptcy filing will trigger a Credit Union to put an administrative freeze on all of the debtor's accounts.  This typically only happens when the debtor has loans with the Credit Union.  This can be auto loans, credit cards, lines of credit or a mortgage.  Under bankruptcy law you are required to list all of your creditors. This is true even if you plan to keep paying them. For example, if you have an auto loan with a Credit Union that you are current on, and plan to keep, you still need to list the Credit Union as a creditor. You will also file a statement of intent that tells the Credit Union that you plan to keep making payments on the loan.

Even if you plan to remain current and pay on a Credit Union loan, they will almost always put an administrative freeze on your accounts when they receive notice of the filing. This means that you will not be able to use your debit card or ATM card and you lose all privileges for the time being.  The Credit Union may unfreeze the account, but typically will require you to reaffirm the loan with them.

When clients have Credit Union accounts and also loans there we always advise our clients to get fresh accounts set up at an institution where they owe no money to.  As you can imagine, it can be a real headache if your bank account is suddenly frozen.

For more bankruptcy information and to learn more about our firm visit www.pacificbankruptcy.com