Your Credit Union and Bankruptcy

Posted by Charles Nguyen on January 31, 2022 at 7:30 AM

shutterstock_1711047829You may think that your credit union is the same as a typical bank, and in many respects, it is; but, there are some differences. For example, your credit union is a nonprofit, whereas a bank like Huntington Bank, is for profit.

Another difference is how your credit union debt, whether it’s a car loan, personal loan or credit card, and your personal accounts are affected when you file for a bankruptcy.

If you have a car loan with a credit union, then most likely they will send you a reaffirmation agreement. This agreement basically ties you back to your car loan/contract again after you file bankruptcy. Even if you intend to keep the car, and continue to make your car payments, the credit union will make you sign this agreement and if you don’t sign it, they’ll repossess the car. Reaffirmation agreements generally aren’t advisable because you’re tying yourself back to debt that you may not necessarily want.

Further, any loans or credit cards you have with a credit union will have a cross collateralization clause in their contract. Essentially, this clause will bind all your debts together. For example, if you have car loan and a credit card with your credit, and you want to keep the car, then the credit union will take your credit card balance and add it to your car loan.

In addition to reaffirmation agreements and cross collateralization, your credit union will close your checking and savings accounts when you include any debt that you have with them in your bankruptcy.

So, what should you do if you have a credit union account and debt with them? First, open a bank account and switch any direct deposits from that credit union to your new bank account. Then, if you have a car loan and any debt with your credit union, ask yourself, is it worth it to keep the car loan if they’re going to include additional debt to it?


Dealing with your credit union and a bankruptcy can be difficult, so it’s a good idea to speak to an attorney knowledgeable in this area. If you have questions or are ready to get your life back, reach out to Minnesota’s nicest bankruptcy law firm by going to You won’t regret it!


Topics: Bankruptcy, Credit

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