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.