Feeling Dilemma with Credit Union

[Optimistic09]

We will be filing Chapter 7 in a few months and have quit paying all unsecured creditors except our Credit Union where we have an unsecured ready reserve loan. The loan payment is automatically taken out each month.

Our dilemma is that we like the benefit that our credit union has of making all deposits available immediately. We can go to the ATM machine at the Credit Union deposit cash or checks and it is available immediately. My husband started banking there when he bought his first car forty one years ago. We are on the fence about keeping paying through the bankruptcy if that is possible.

We wonder if when we file bankruptcy if they will raise the interest rates which would not make it not worth it to keep paying. Will they dump us anyway if we do pay it off? How do you know what any credit union will do?

[HakunaMatata]

I understand your loyalty to your CU to an extent (long-standing member, quick accessibility to funds). However, your Trustee may not. If you've ceased payments with all your creditors excluding your CU, your CU payments may be deemed "preferential" by the Trustee. This doesn't directly affect you; although, the Trustee may seek those payments and distribute them among creditors.

You have the opportunity for a fresh start. Do you really want to burden yourself with an indebted fresh start? If your reasoning is based on loyalty, your Trustee may disagree. If your reasoning is based on convenience, there are plenty of banks which offer similar terms. I've banked with numerous CUs and most offer the benefits you describe.

Bankruptcy may involve feelings of loyalty and pride in long-standing relationships; although, it is ultimately a business decision. I initially struggled with similar feelings and recognized my current CU doesn't care about my solid pay history and long-standing membership. If I neglected to submit a payment in a timely manner, they wouldn't take these factors into consideration and I would endure penalties. I can't fault them, this is business.

While there tend to be common practices with CUs, they also foster individual policies and practices. It's difficult to determine exactly how your CU will react to your filing. Some have had success (ex/ reaffirming loans with adjusted terms) and others have struggled (ex/ frozen accounts). I'd prefer to eliminate guesswork from my situation while embracing a fresh start.

[adviceplease]

You need to open a new checking account at a different bank. Hubby and I have been at our CU for over 10 years and we have our 1st and 2nd mortgage on our home that we are keeping and a visa card with under $700 on it and only $17 a month payment. Our lawyer told us we can't pay the $17 a month and we have to file on all unsecured debt. I have been on here many times complaining and asking what to do and the advice is just move on. So I took the advice and moved our direct deposit to a new bank before the CU can freeze our accounts. Yeah it was a pain but at least now I have some piece of mind.

[Optimistic09]

I appreciate both replies I have received. We have really flip flopped on our decision on what to do and are having a hard time just looking at this as a business decision. We still owe about $4,000 so it would be a significant amount to pay back when we would not have to. I think the fact that it is local is what makes it hard and also the convenience and fact that deposits are available immediately.

We have to decide by the 10th when the automatic payment comes out.
We have opened up another checking account at a different bank. We can't close the CU account because of the ready reserve loan. If we decide not to have money in the CU to pay on the 10th we think they will take the payment out of the reserve that we do have available. When we run out of our available reserve then there would be late fees etc and then it would be too late to decide to pay.

I appreciate this forum. It has allowed me to think this out loud and get some feedback on what feels so emotional.

[HakunaMatata]

The emotional/moral aspects, for me, were the initial hurdles. Thankfully, I was able to settle into business-minded focus. Since filing, I'm forward-thinking. I've been given an opportunity for a financial fresh start. Sure, it's a bit scary in some respects. I've jumped countless fear hurdles throughout my life. I can deal with a few more (and it will be easier to jump without a money pit house and debt weighing me down!). BK isn't about pride, morality, or failure. It boils down to business. I realized I wouldn't continue to invest in a business with no customers. I'd close the doors and move on. I've closed the doors to my financial past and intend to begin anew.

I know these initial decisions can be challenging. Try to keep the big picture in mind.

Good luck!

[klandsb]

I had banked with the same bank for over 20 yrs and it was so hard for me to leave. Now that its done I am like what was I thinking...I made it out to be more than it really was. I am alot happy and know my money is safe now....
I had a line of credit at my old bank and they auto withdrawl there pmts each mth out of my checking but since I have no money in there they are taking the money out of the line of credit which will hit the max of $1000 soon. I have read on here that as soon as some bank get the bk notice they close the accts ... How convient is that !!!