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Can I Keep My Credit Union Account if I File for Bankruptcy?

Some clients call our office wondering, "Can I keep my credit union account if I file for bankruptcy?"  To answer this, we need to understand the type of credit union account. If it is a checking or savings account, it should remain unchanged by the bankruptcy filing. That is to say that the actual account may remain open. However, what happens to the balance of the account will depend entirely on the bankruptcy proceedings.

Each situation is unique

Also, if the account in question is actually a credit union loan, then one needs to address the loan within the bankruptcy filing. Someone filing for a Chapter 7 liquidation bankruptcy needs to decide what debts they want to discharge or get rid of. People can include credit union debts in those that one is discharging. If someone wishes to continue making payments on them, they need to officially be reaffirmed.

In a Chapter 13 bankruptcy, debts are not liquidated. Instead, people pay a portion of the debts back over a set schedule. After completing the payments, it eliminates any remaining balances, including debts with the credit union. We can discuss credit union debts in detail when preparing to file.

Can I keep my credit union account if I file for bankruptcy?

When it comes to a checking or savings account with a credit union, those filing for bankruptcy need to be aware that these assets, as with any assets, can go towards paying off debt. When a person files for a Chapter 7 bankruptcy, for example, all assets become the property of the estate. The court can then decide what assets will be liquidated to pay off any remaining debt. This could mean liquidating a checking or savings account just like it can mean selling off properties.

However, in California, people have the option to choose between two different rules for exemptions. Anything that is listed under the exemption will not be liquidated. This allows for people to keep a small portion of their assets in a bankruptcy. If the credit union account balance is important, this can be what is exempted so that it remains untouched.

We will go over all of the details

Some people choose to do so for the balance but more so, for their reputation at the credit union. In other words, if the credit union account and balance are of importance to someone, we need to discuss this during the meeting. This way, we can prepare accordingly and make sure that the account is exempted.

Likewise, if a loan with a credit union is to be left out of the bankruptcy, we must plan for it too. The individual will need to reaffirm the loan with the credit union. This is an agreement stating that the borrower who is filing for bankruptcy plans on continuing to make payments as agreed and that the lender accepts their right to do so.

Get answers to your questions

To get answers to questions like, "Can I keep my credit union account if I file for bankruptcy?", call our office and schedule a consultation.

NOTE: This is for informational purposes only and does not constitute legal advice.