Bankruptcy and Credit Unions

For banking and loans, some people prefer large, well-known banks; however, large banks can be impersonal and can put off some people with their lack of personal touch. Credit unions seem to be a good alternative option and often offer great rates and have low fees. Many people choose to work with a credit union solely based on the personalized service that they can provide. These benefits can be appealing, but there are some drawbacks that you need to be aware of when filing bankruptcy while you have credit union accounts. This is why it’s important to have a qualified bankruptcy attorney to help you navigate the waters and find all the exemptions you qualify for to help protect your assets and property.


How Credit Union Debt Works

Some people use credit unions for their basic banking needs, such as checking and savings accounts. It’s also possible to use a credit union not only for those options, but also for getting an auto, home, or other type of loan. Things can get a little complicated when filing bankruptcy when you have debt with a credit union.

Most traditional banks separate their debts by categorizing them as secured or unsecured debts. Because credit unions are smaller, they often use “cross-collateralization.” This means that if you have a credit card and an auto loan through a credit union, they will often tie the credit card to your auto as collateral. This gets complicated if you were to file for bankruptcy on your credit card, because you may lose your car that was used to secure your credit card.

When filing bankruptcy related to credit union accounts, they could freeze your regular checking and savings account to “setoff” the debt you owe in an effort to pay off a portion of your credit card debt. It is possible that they will work with you, however you will need to have your debts current and/or pay them off, and that can be difficult while filing bankruptcy.

Credit unions function with low fees and interest rates because all members of the credit union support the other members. If one member files bankruptcy, all the members could suffer. If you file bankruptcy, it is possible that you will also lose your membership status with the credit union.


Protecting Your Assets

If you’re at the point where you’re considering bankruptcy, you’re probably under tremendous stress and fearful about what you could lose. It can be easy to make one of the common mistakes people struggle with as a result of fear or simply being misinformed about bankruptcy law and requirements. I‘ll help you make the right choices to get a handle on your debt and protect your assets. If moving your money from a credit union to a different bank is the best option, I’ll help you do this in a way that avoids bankruptcy fraud and sets you up for success.