Chapter 7 & Credit Unions

[Calamity]

My husband and I are starting the process of filing chapter 7 BK (my husband is with the attorney as we speak). We currently have a 2001 Ford Escape and a unsecured loan both financed through our credit union . We owe 3 more years on the vehicle and 12 months on the unsecured debt (approximately $3,000).

I made the stupid mistake of asking the credit union about cross-collateral. As soon as I got done talking with them, they froze my accounts. I have not officially filed bankruptcy and I am not behind on any payments with this credit union (on the vehicle or the unsecured loan) or any other obligations for that matter. They stated that as soon as they are aware of a bankruptcy they can freeze the accounts.

With that said, it makes me very cautious and worried about re-affirming my vehicle loan and the unsecured debt with them. I am also worried about rolling the $3,000 from the unsecured into the vehicle, which would put me upside down on it. I am equally as worried about leaving my family with one vehicle since I imagine it will be a long time before we will be able to purchase another one.

Will the loans be rolled together or will have still have two payments like I do now? I wonder if it's best to have all debts discharged and start new or hang on to a decent vehicle while I have it? Can I even choose to relinquish my vehicle and have the unsecured debt discharged?

I am not sure what's best.

[Calamity]

Oh, and the accounts were unfroze today after a discussion with my attorney. I then emptied the accounts. They even froze my 4 year old sons savings account.

[canusaybroke]

you bring up a great point....My wife and I are custodians on our son's (2 1/2 years old) bank account. He has about $1200 in it (mostly from his grandmother who deposits $20 biweekly into it) The wife and I have two visas from the cu that we are going to take down in the Bk...wonder if they will try to freeze his account and take the money...??

[dingdong]

I would take the 1200.00 out.

Better to be safe than sorry. Put it in a bank that is not associated with the BK.

[Calamity]

Definitely remove the $1,200. My husband just got home from our attorney and she flat out said, "Do me a favor, close the account and remove your son's money."

[aces67]

You should definitely close the account. Just move it to a different bank and you should be fine.

[hurtininaz]

My CU cleared all the cash out of my checking account as soon as the truck payment went late. They haven't figured out that my husband has an account with too. Waiting for one more check to clear before I close it!

[tkharvey]

Credit unions are ruthless! They repo'd my daugher's car last week, even though we WERE CURRENT ON THE CAR PAYMENT! However, we are past due on a Visa with the same credit union and exercised their right to "cross collateralize". We are including the visa (among others) in our bk, but can't file until our loan mod with our mortgage lender goes through (hopefully). Beware of credit unions! Take your money out and change accounts NOW.

[betpie]

Wow, that's good to know. Tell me, does anyone think my credit union will give me trouble if I don't have any outstanding balances with them? I have a specialized checking account (it's for people with Checks Systems records, it's just got a bunch of restrictions on it) and now I'm wondering if they'll cancel my enrollment in the program once I file...

[Calamity]

Honestly. I won't ever do business with a credit union again. They froze my account and I was current on both my vehicle loan and unsecured loan with them. I've actually had the "unsecured" loan through them for 4 years and paid a hefty interest rate because it was "unsecured". It makes me angry now that they secured it with the vehicle I bought two years after the loan but never lowered my interest rate to account for that. I think that is having their cake and eating it too.

[StartingOver08]

It makes me angry now that they secured it with the vehicle I bought two years after the loan but never lowered my interest rate to account for that. I think that is having their cake and eating it too.


Just so you know, not only do CU's do this - but banks will do this too. Only it is called the 'Right of Setoff' when a bank does it. Look at this link: http://www.schreiblaw.com/pdf/Bank_Offset.pdf

Anytime you have deposit accounts and loans with the same institution, you run into this. Just be aware so you can plan accordingly.

BTW, when I reaffirmed my vehicle loan with my CU - I was able to remove the cross collateralization from the loan. I had a checking and savings account that I had emptied before filing. I also had a large visa balance and a second mtg that I was including in my Ch 7. So you can renegotiate these terms with the BK dept, YMMV.

[Calamity]

It makes me angry now that they secured it with the vehicle I bought two years after the loan but never lowered my interest rate to account for that. I think that is having their cake and eating it too.


Just so you know, not only do CU's do this - but banks will do this too. Only it is called the 'Right of Setoff' when a bank does it. Look at this link: http://www.schreiblaw.com/pdf/Bank_Offset.pdf

Anytime you have deposit accounts and loans with the same institution, you run into this. Just be aware so you can plan accordingly.

BTW, when I reaffirmed my vehicle loan with my CU - I was able to remove the cross collateralization from the loan. I had a checking and savings account that I had emptied before filing. I also had a large visa balance and a second mtg that I was including in my Ch 7. So you can renegotiate these terms with the BK dept, YMMV.

I am happy to hear you were able to get the cross collateral removed before reaffirmation.

My attorney has actually warned us against reaffirming anything, so I am not sure what we are going to do. I am really torn on the decision.

I do think the right of set-off is totally different. Who is going to argue that they bank/credit union has a right to be monies should you default on your loan? I don't, because that's our agreement. I don't really consider money in bank accounts to be collateral necessarily, since the account can be emptied and moved at anytime; which technically gives me the right to remove my "collateral" whenever I chose.

I am not defaulted on my loans with my credit union. Frankly, I am not defaulted on anything. All my loans are current, and they still froze my account, simply because I asked about cross collateral and how it works (trying to figure out what are next move is). Once they had wind I was filing bankruptcy, the took my account. I haven't even filed yet. I had to get my attorney involved to get my account unfrozen.