Many of my clients who have a credit union account also have debt with that credit union. They may have an auto loan, line of credit, credit card, or other personal loan withe the credit union. In this situation when a person files bankruptcy the credit union will place an "administrative freeze" on the account as soon as they receive notice of the bankruptcy filing. They do this to protect their interest as much as they can. This freeze can cause big problems for the debtor because they won't be able to use their debit cards, get cash out, or do any general bankruptcy while the accounts are frozen.
If the credit union is going to take a loss in the bankruptcy they will typically terminate the account all together. If the debtor had funds in the accounts when they were frozen, the credit union may offset the funds (take the money to apply to the debt). This means, the debtor may lose that money altogether.
It is ALWAYS advisable to bank at a bank or credit union where you don't have any debt. That way, your bank or credit union won't even get notice of your filing and you don't run the risk of your money being frozen and tied up.
If you have a Credit Union that you use for you banking and don't have debt with them, then there is no reason to change accounts. However, if your credit union holds any of your debt, and you plan to file bankruptcy you should start the process of getting a new, fresh account at another institution.
If you are looking to get a new credit union account in Oregon, you can start looking here: http://www.asmarterchoice.org/
For more information about bankruptcy feel free to visit our website.
What Ryan has said about credit unions will be true for any bank or depositary institution, if you owe them money. What's different about credit unions is that their loan documents include "cross collateral" clauses. These provisions make any collateral that you've given for any loan to be security for all other loans. Thus, after filing bankruptcy, when you think you've paid off your car, the credit union will hold your title until you've paid off any other loans, like credit card accounts, even though those debts were discharged in the bankruptcy.
ReplyDeleteDavid C. Hoskins
Attorney at Law
http://my-bankruptcy-helper.com/
Hi Dave! I agree with you that what Ryan has stated is really interesting to know. I never came across such a cautionary note before. But I've some questions here; I mean I'm confused with few things. First of all, Ryan has not mentioned any specific bankruptcy - either Chapter 7 or 13. I feel situations must be different with individuals filing for different chapters. For instance, if an individual’s Chapter 7 is accepted, his all debts might get discharged. Again, why should a person leave liquid in his/her credit accounts with credit unions if he/she is going to file schedules with courts, as in that case their bankruptcy petition might get dismissed. Please correct me if I’m mistaken!! Thank you!
ReplyDeleteMarc Brown
Senior Financial Writer
http://www.ovlg.com/