Credit Union Loans and Bankruptcy

Credit union loans frequently pop up when reviewing the debts of my clients. These loans can take several forms. Sometimes cars are financed through credit unions. Home equity loans can also be obtained through credit unions. Finally, unsecured bank loans, often used to consolidate other loans, are sometimes owed to credit unions. In any case, they can all be accounted for through bankruptcy. 

Credit unions are often local institutions, in the business of taking savings and issuing loans, and each differs in practice and procedure. Given their local nature, they sometimes lack sophistication in dealing with bankruptcy clients. This means they occasionally will fail to file bankruptcy claims required in Chapter 13 bankruptcy, or they will continue to contact bankruptcy filers after the case is filed. Regardless, at the end of the day, dealing with a credit union will be no different that dealing with any other creditor.

My clients sometimes feel awkward including their credit union because of the local, personal nature of the business. They know the tellers and managers at their credit union, and they have possibly done business there for years. However, these debts should, and must, be included in your bankruptcy. All debts must be treated equally, so if you include credit cards and other unsecured debts, you must also include credit union debts. So, you cannot pay back your credit union to the detriment of your other creditors.

Secured debts such as car loans and home equity loans obtained through credit unions are also treated as normal under bankruptcy law. If they are secured, they must be paid through the bankruptcy, generally under the contract terms. Once again, credit unions may ask for different information regarding the bankruptcy filing, but the results will be the same in the end. You car loan or home equity loan through the credit union will remain unaffected. 

Having a debt with a credit union can sometimes leave my clients feeling uncomfortable. But, keep in mind that I will be the one dealing with them, and that at the end of the day, they are just a normal creditor. After the bankruptcy is filed, the relationship can be re-established.

If you have a debt with your credit union and are considering bankruptcy, contact us to discuss your options.