Will the credit union unfreeze my funds after my bankruptcy is discharged or can they keep it?

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   Ronald DrescherPro

   Baltimore Chapter 7 Bankruptcy Attorney

   Contributor Level 12

   

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   Answered May 25, 2012 12:34. Your attorney is correct. Banks holding deposit accounts have the right of setoff (sometimes called offset) if their depositor owes a debt to the financial institution. The United States Supreme Court has ruled that these banks, or credit unions, may freeze depositors' accounts after filing bankruptcy in order to preserve these offset rights. These rights are somewhat similar to the rights of a holder of a consensual leave therefore they are not subject to your exemptions.

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   Derek CaldwellPro

   Raleigh Chapter 7 Bankruptcy Attorney

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   Answered May 25, 2012 13:25. Your attorney is correct. I normally advise clients to draw down their deposits at credit unions they belong to that they also owe money to prior to filing of their case to avoid this issue.

   DISCLAIMER: This message is intended as a general discussion of legal issues and not as a statement of fact, legal... moreDISCLAIMER: This message is intended as a general discussion of legal issues and not as a statement of fact, legal advice or a legal opinion. No attorney-client relationship is created by this message. Do not act or rely upon law-related information in this communication without seeking the advice of an attorney licensed to practice in the relevant area. I am a Federally Designated Debt Relief Agency under the United States Bankruptcy Code. I proudly help people in financial need file bankruptcy cases. IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment). less

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   Dean L D'Mellow

   Seattle Chapter 7 Bankruptcy Attorney

   Contributor Level 8

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   Answered May 25, 2012 12:30. Usually the credit union (or any creditor) has a right of set off. For instance, you have a line of credit through your credit union for 10,000 and you have 7,000 in your checking account.

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   Dorothy G BuncePro

   Las Vegas Chapter 7 Bankruptcy Attorney

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   Answered May 25, 2012 13:02. Every credit union has their "members" sign an agreement called "cross collateralization" (called set off if a bank does it) which says that if you owe money to them, they can take your deposit account, such as checking or savings.
   
   It is easy to forget this part of the agreement as it is usually presented to you after you have been waiting for a long time to open the account & is in very small print.
   
   Hope this perspective helps!

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