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If you have been with your current bank or credit union for a while and have developed a good working relationship with them, you might be concerned that filing for bankruptcy may affect that relationship. You may wish to maintain your current banking situation for a number of reasons, and filing for bankruptcy can potentially cause issues that may affect that relationship. There are a number of factors that must be taken into consideration when determining if you will be able to continue banking at your current financial institution.
The good news is that, in most cases, the relationship with a bank can be preserved. This is especially true if the bankruptcy filing does not involve an unsecured loan that would be included in the filing. Even when loans are discharged, banks have an obligation to provide general services to you. However, they may be reluctant to provide loans in the future, but there are many lenders who may be willing to help rehabilitate the credit of someone who has filed for bankruptcy recently.
The following information can be used to help you gain a general understanding of what to expect from your bank or credit union when you file for bankruptcy. Refer to a Florida bankruptcy attorney for more specific information and answers to questions pertaining to your unique case.
Generally speaking, filing for bankruptcy in and of itself will not be a reason for your financial institution to close your accounts. As long as you don’t owe your bank or credit union any money, you should be able to continue banking with them. However, if there is an unsecured debt owed to them when you file, they may no longer allow you to continue your banking privileges with them.
If you do your banking business with a regular bank and not a credit union, your accounts likely will not be closed just because you filed bankruptcy, even if you happen to owe them money for fees or overdrafts. Many major banks have proven to be willing to continue doing business with clients even if they have declared bankruptcy while owing them a debt.
However, just because you may be able to maintain your relationship with your bank doesn’t always mean that you should. Contact an experienced bankruptcy attorney who can help talk you through these decisions and help inform you about the risks and benefits involved with staying with your bank.
Though you may do your banking with a credit union, most credit unions are operated differently than banks, and as such, have different rules regarding members who declare bankruptcy while owing a debt to the union.
In order to be a member of a credit union, there are certain requirements that you must maintain to be in good standing, one of which is not causing the credit union a financial loss. If you declare bankruptcy and list a loan or credit card from your credit union, that would be considered a financial loss that you have caused them, and your membership will most likely be revoked.
If your membership is going to be revoked, your credit union will send you a letter informing you that your membership has been terminated due to the financial loss. However, if you are serious about maintaining your membership with your credit union, you do have options. You can agree to pay back your debt by signing a reaffirmation. However, this is not considered a good option in most circumstances. One primary reason is that bankruptcy requires all debts to be treated equally, so the debt to the credit union must be repaid outside of the 90-day lookback window and preferably much sooner than that.
You may be wondering if you could just leave your debts to the credit union off of your list of creditors when filing for bankruptcy in order to retain your membership with your credit union. Unfortunately, when filing for bankruptcy, you have to list all of your creditors. You aren’t permitted to pick and choose the debts on which you want to file bankruptcy.
If you owe money to a financial institution, whether a bank or a credit union, it is generally inadvisable to place your money with them right before or after filing for bankruptcy. You will potentially be putting your money at risk as it may be subject to the right of set-off. The right of set-off enables some credit unions or banks to take money from your current account in order to pay down the debts you owe to them. An automatic stay can prevent this action, as can a discharge of debt, but the bank may have other forms of legal leverage to still perform a set off at some point. If you continue to bank with your current bank, you run the risk that your bank will invoke their right to set off and leave you with money in your account, causing additional financial issues for you.
Whether or not your particular bank or credit union can utilize the right to set off depends on a number of factors that depend on the rules and regulations of the state in which you live. In this situation, it is often better to err on the side of caution and choose to transfer your accounts to a new bank or credit union. Though your bank may still be able to file a right to set off in specific cases, they will have to go to court in order to get permission to exercise that right.
Having to consider filing for bankruptcy can be a stressful time, full of questions and uncertainty. Hiring an experienced bankruptcy attorney can help to alleviate some of that stress. A knowledgeable attorney from Hoskins, Turco, Lloyd & Lloyd will be able to answer any questions you may have in addition to advising you on how to best proceed with your case.
If you are considering filing for bankruptcy, contact an attorney from Hoskins, Turco, Lloyd, and Lloyd. With over 30 years of experience representing bankruptcy clients, an attorney from our firm will be able to confidently guide you through the bankruptcy process. We have four convenient office locations in order to serve you throughout the Treasure Coast. Our offices are located in Okeechobee, Port St. Lucie, Vero Beach, and Fort Pierce.
Contact us any time in order to schedule your free, no-obligation consultation with one of our experienced attorneys. We offer both in-person and virtual consultation options. We will listen to the details of your case and will be able to provide you with individualized advice based on your particular circumstances. You can contact us by calling 866-460-1990 or visiting our online contact page.
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