Credit Unions and Bankruptcy

As an Indiana bankruptcy attorney, I frequently encounter clients who have debts with a credit union.  Often, I find these clients also have their mortgage, car loans, credit cards and lines of credit with that same institution.  While this is a testament to the good customer service offered by credit unions, it often creates difficulties for people facing bankruptcy.  Credit union, unlike traditional banks, almost always take an "all or nothing" approach with  members who file bankruptcy. 

By that, I mean that the credit union will not enter into a reaffirmation agreement on your car loan but not your mortgage or credit cards.  Their position is that if they are forced to suffer a loss because of the member's bankruptcy (i.e., you want to keep your car but not your mortgage and credit card debt) then they will not allow you to do business with them at all.  The credit union demands that you reaffirm all debt (so you remain liable for all debt owed to them even after the bankruptcy) or you do not reaffirm on any debt.  In these tough economic times, I would think credit unions would rather get some money as opposed to none.  Apparently, the credit unions do not see it that way. 

I do not write this post to discourage people from using credit unions.  However, I do think it is important for people looking at bankruptcy to understand the issues they face IF they have debt with a credit union.

Contact my office today at 317-566-2080 if you have questions or need more imformation on this or other bankruptcy related matters. You can also visit my website at www.vanwinklelegal.com.

Is child support or spousal maintenance dischargeable in bankruptcy?

Generally speaking, child support and/or spousal maintenance are not dischargeable in bankruptcy.  If the Bankruptcy Court can be convinced that the spousal maintenance is being paid as a property settlement agreement and is just being called maintenance, then the Court may discharge that portion in a bankruptcy. 

It has become increasingly difficult to discharge these types of debts in bankruptcy.  They are actually given priority treatment and are paid ahead of all other creditors.  Also, in a Chapter 13, if you fail to stay current on child support and/or spousal maintenance, the Court can deny your discharge (the order that says you no longer owe your debts). 

As an Indianapolis, Indiana bankruptcy attorney, I can help you sort through these types of issues.  I can be reached at 317-566-2080. 

I surrendered my house in bankruptcy but I still own it....what happened?

So you filed bankruptcy and surrendered your house.  You moved out and thought you had put the loss of your home behind you.  Then, months later you get a letter or call from your friendly neighborhood code enforcement officer.  Why is he contacting you?  You don't own the house anymore....right?  As an Indianapolis, Indiana bankruptcy attorney, I am frequently faced with this question.  The reality is that under Indiana law (and most other states as well), you continue to own the home until such time as it is sold at a Sheriff's Sale.  Since you still own it, you are still responsible for making sure the property is kept in good condition (and in compliance with city codes regarding lawn care, etc.).  If you fail to maintain the lawn, or keep the sidewalks in a clean and safe condition (or comply with any other city housing codes), you can be held personally responsible.  This could result in costly fines being levied against you after the bankruptcy is discharged.  You would be forced to pay them. 

The same is true for your homeowner's association dues.  Until the house sells at a Sheriff's Sale, you will continue to be responsible for the dues that accumulate after the bankruptcy.  Any dues you owed at the time of filing will be discharged.  However, any dues assessed after the date of filing and before the Sheriff's Sale will be your responsibility. 

Another area of concern is your responsibility to third parties who are injured on your property or by your property after you have filed bankruptcy and surrendered the home.  Since you are the owner of the property and entitled to "all incidents of ownership" until a Sheriff's Sale takes place, you could be held liable for third party injuries.  A homeless man decides to crash in your now vacant home and he falls down a flight of stairs.  He could opt to sue you for the injuries he sustains.  Whether he would prevail in that lawsuit is another story, but he could certainly pursue you. 

What if your empty house burns to the ground and in the process catches the neighbor's house on fire....are you liable for the damage?  You would most likely be responsible since you are still the owner of the property and therefore still responsible for the house. 

This is where your homeowner's insurance kicks in.....right?  Well that depends on whether you or the mortgage company have kept the home insured.  Most mortgage companies escrow insurance premiums these days, but if you are not paying your mortgage payments, the property might not be insured.  Even if it is insured, it may not cover injuries sustained by third parties.  The mortgage company may have taken out "forced place" insurance that will protect their interest in the property
only but not protect you against claims from third parties. 

The important lesson to learn here is that just because you surrendered your home in a bankruptcy does not mean you are no longer the owner of the property.  It is important to take steps to protect yourself until the Sheriff's Sale takes place. 

If you have questions/concerns regarding this or other matters, please contact The Law Office of Travis Van Winkle, LLC.  317-566-2080.