Cross Collateralization

[vrspartak]

I have been reading prior posts, and have a general understanding of what this is. I was just curious to know if anybody has experienced this with Citibank. I have 2 CCs and an auto loan with citibank and will be filing in Jan. By that point I will be about 60-90 days late on both cards, and about 60 with the car loan. Would they automatically freeze my account? At what point do they freeze an account?

Also, at what point does it become illegal for them to freeze an account? Is it after filing, discharge, or closing? Thanks.

[justbroke]

Would they automatically freeze my account? At what point do they freeze an account?

usually, the big banks don't do this cross collateralization. It's mostly done by small banks and especially Credit Unions. If you hare having issues with a line of credit, be aware that most banks have something known as a "right of setoff" where they can take money out of any demand deposit account (DDA) and make payments on a (or even pay of an entire) line of credit! I learned that the hard way myself!

Also, at what point does it become illegal for them to freeze an account? Is it after filing, discharge, or closing? Thanks.

It only becomes illegal (violation of stay)... if they continue to unreasonably exercise control over that money, or using their right of setoff... without filing for Relief from the Automatic Stay!

[Blueboy]

usually, the big banks don't do this cross collateralization. It's mostly done by small banks and especially Credit Unions. If you hare having issues with a line of credit, be aware that most banks have something known as a "right of setoff" where they can take money out of any demand deposit account (DDA) and make payments on a (or even pay of an entire) line of credit! I learned that the hard way myself!

It only becomes illegal (violation of stay)... if they continue to unreasonably exercise control over that money, or using their right of setoff... without filing for Relief from the Automatic Stay!

Would that include a CD?

[justbroke]

Would that include a CD?

Depends on the terms that are specified. Usually, it's only DDA type accounts, where there is no penalty involved. However, I wouldn't put it past a bank to include the right of setoff on all depository accounts. A CD is a time-deposit and may actually be covered. I can't answer that as I'm not knowledgeable on that topic.

However, I did find this in a case involving a CD. This was the text on the back of the Certificate of Deposit.

This bank is authorized to apply this account, whether savings or certificate of deposit, toward the payment of any indebtedness due this bank from the depositor or depositors, or either of them, whether the debt is several and this account is joint, or the debt is joint and the account is several.

[Blueboy]

Thanks I have a CD that is backing a surity bond for my S-Corp and it has me concerned.

[vrspartak]

ttt