Credit Union question

[sofarindebt]

I am hearing that if I bank with a credit union, they will try to take money out of my account upon learning of my bankruptcy (I have a $1500 line of credit with them that is used up right now) but how can they do this, isn't it in violation of the automatic stay? Will they cancel my account if I include them in the bankruptcy and not reaffirm the debt?

[CATCHMEIFYOUCAN]

Credit Unions have what they call "cross collateral," if you have a checking/savings account with them, and if you owe on a loan or a cc with them, they can withdraw any available amount you have towards the debt you owe!

I had a checking and savings account with NFCU, and a loan and a couple credit cards. I couldn't physcially close the account, I just STOPPED USING the accounts, and kept the minimum balance required ($5 - but I actually had $10). I had all my direct deposits redirected into a brand new bank/account, knowing that I was going to file, and as suggested by the DMP I was in at the time (but since than have filed for BK). The $10 I had in my savings account NFCU went and withdrew $5 dollars towards one of their credit cards, had I had more they would have taken whatever the amount leaving me with the minimum of $5.
What they do is pretty much "fire," you from using there account/services, you will no longer have access to your accounts. So my suggestion is STOP using them if you have checking/savings account, leave the minimum balance (usally $5) and if you have direct deposit, you better start redirecting elsewhere!

Just to add, I had a checking account with Chevy Chase, with a $500 overdraft account (similiar to your line of credit) which was all used up. I included the overdraft in my BK. Since I had filed, they sent me about 3 statements each accruing interest (and yes, IF you have already filed and they are sending you statements, accruing interest) it IS a violation of the automatic stay, which you lawyer should handle if need be.

Best Wishes, Catchmeifyoucan

[sofarindebt]

SFID, thanks for the info

did they take that $5 AFTER you filed bankruptcy, or before?

[CATCHMEIFYOUCAN]

Hmmm, they took just before I filed, I believe. I was in a DMP (kind of like a CCCS program) but it wasn't approved by the courts. The DMP was the one that told me either close my accounts if I could or just stop using them and open up a new account at a different bank because the warned me that some creditors will use what they call "cross collateral," on ya! And sure enough, my money disappeared, luckily that was the only good thing that came out of that RIP off DMP!

Catchmeifyoucan

[davie20001]

What if i have a heloc with them?

Will the credit union close that account as well? i assume no, but when i move all of my accounts to another bank, how will they collect on the heloc? do i just put money into the account on the due date of the payment?

[sofarindebt]

Good question, I would like to know as well......

bump....

[lrprn]

Will the credit union close that account as well? i assume no, but when i move all of my accounts to another bank, how will they collect on the heloc? do i just put money into the account on the due date of the payment?

Can't speak for your specific credit union, of course....in our situation, we had our HELOC and an overdraft account with a local bank that we had been with for 20 years before we filed. To deal with the cross-collateralization possibility, before we filed we opened a new checking account at another local bank, and left $5 in our first account. Our first bank's HELOC monthly payment is treated just like our other bill payments - we pay our first bank's HELOC payment by check out of our new account every month. Our overdraft account with our original bank will be wiped out at the end of our Ch 13 plan.

Don't let an emotional connection to your credit union prevent you from doing what's needed to protect yourself. When you file, if your credit union is going to take the money out of your account to cover the overdraft , they won't give you any notice - the money will just be gone when you check the account. If they do that, how will you pay your other bills and living expenses until you are paid again? We decided in our case, why take the chance? Your lawyer can advise you about what's best in your situation - be sure to ask. Good luck - please let us know what you decide to do.