Credit unions are a lot like banks on the surface, but there are some important distinctions. While they typically offer a much more personal banking experience and more benefits than they typical bank, they are also afforded some special treatment when it comes to bankruptcy cases. If you are considering bankruptcy but have a checking account, credit card, mortgage, or loan through a credit union, there are some special considerations that youll have to make.
The problem with credit unions
Credit unions are great to work with so long as things are going okay financially. But when bankruptcy is looming, things can get ugly. That is the negative side effect of having such a personal relationship with a banking institution. If you discharge your debts to a bank through bankruptcy, you can still continue to work with that institution after bankruptcy. But when you discharge debts owed to a credit union, any current or future relationships with that credit union are ended. Its important for people with ties to a credit union to keep that in mind when considering bankruptcy.
Three options
There are three options available to people who will file for bankruptcy in regards to their credit union. The first is to keep the mortgage and credit card by continuing to pay them off after bankruptcy. Credit unions have an exemption in the bankruptcy code that allow you to discharge other debts but continue to pay debts to the credit union.
A second option is to keep your mortgage but lose your credit card. Because you will discharge credit card debt owed to the credit union you will know longer be able to bank with them. They cannot however foreclose on your home so long as you continue to pay your mortgage after bankruptcy.
A third option is to walk away from your mortgage and credit card. Those debts will be discharged and your relationship with that credit union will be ended. With the second and third options its important to stop putting money into any accounts you have with the credit union as they will have the right to seize your funds in the event of a bankruptcy.
In considering which option to take, think about how important the relationship with the credit union is to you. Depending on how much is owed and what benefits the credit union offers, it may be worth it to maintain the relationship. In most cases however, it makes more sense to discharge the debt and walk away. A bankruptcy attorney can assess your situation and make the appropriate recommendations.
Business, real estate, and bankruptcy law and litigation news brought to you by http://mbblegal.net/
Source: http://www.foxbusiness.com/personal-...st-bankruptcy/
The problem with credit unions
Credit unions are great to work with so long as things are going okay financially. But when bankruptcy is looming, things can get ugly. That is the negative side effect of having such a personal relationship with a banking institution. If you discharge your debts to a bank through bankruptcy, you can still continue to work with that institution after bankruptcy. But when you discharge debts owed to a credit union, any current or future relationships with that credit union are ended. Its important for people with ties to a credit union to keep that in mind when considering bankruptcy.
Three options
There are three options available to people who will file for bankruptcy in regards to their credit union. The first is to keep the mortgage and credit card by continuing to pay them off after bankruptcy. Credit unions have an exemption in the bankruptcy code that allow you to discharge other debts but continue to pay debts to the credit union.
A second option is to keep your mortgage but lose your credit card. Because you will discharge credit card debt owed to the credit union you will know longer be able to bank with them. They cannot however foreclose on your home so long as you continue to pay your mortgage after bankruptcy.
A third option is to walk away from your mortgage and credit card. Those debts will be discharged and your relationship with that credit union will be ended. With the second and third options its important to stop putting money into any accounts you have with the credit union as they will have the right to seize your funds in the event of a bankruptcy.
In considering which option to take, think about how important the relationship with the credit union is to you. Depending on how much is owed and what benefits the credit union offers, it may be worth it to maintain the relationship. In most cases however, it makes more sense to discharge the debt and walk away. A bankruptcy attorney can assess your situation and make the appropriate recommendations.
Business, real estate, and bankruptcy law and litigation news brought to you by http://mbblegal.net/
Source: http://www.foxbusiness.com/personal-...st-bankruptcy/