In 2010, 1.5 million people are expected to file for bankruptcy and even more in 2011. If you are one of these people who are considering the process, there are some important things you need to know. In a bankruptcy filing, any money that is in your bank account, at the time of filing, technically is property of the bankruptcy estate. If you don't have an exemption to protect it, the bankruptcy trustee can possibly take some or all of it. Legally, it belongs to the bankruptcy estate. Sometimes banks try to be helpful by freezing your account where you have no access to the money, even if you have an exemption to cover it. This can turn into a terrible situation for the debtor, when checks for bills start being bounced for insufficient funds. Knowing this in advance, it's a good idea to pay your bills with cashier's checks, so you don't end up getting evicted from your apartment or home. Banks generally have the right to offset a debt with the bank account, but they seldom do it. Many times when a bank is notified of a bankruptcy filing they immediately freeze the bank account and ask the court to access the funds owed to them.
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When using a credit union, most consumers are oblivious to the fact that the credit union they keep their money in has a cross collateralization clause in their terms contract. A cross collateralization clause is the Dragnet clause to secure the money in your account against your debts. Many debtors use credit unions for automobile loans and don't realize that the money they have in their account can be attached to their payments if they get behind. This becomes a problem for individuals that are filing for bankruptcy that want to walk away from their car and give it back. If there is a negative balance and the credit union member has money in their account, the credit union can take it as it was security for the loan along with the automobile itself. These time bombs planted in the fine print of a loan agreement also include credit card debt. Many people who belong to credit unions do all of their banking, credit union credit card, and car loan through the establishment. Where the situation gets very ugly is when a debtor gets themselves in financial trouble and has to file Chapter 7 bankruptcy. Say for instance, they decide they want to keep their car and continue paying for it, but they also owe a large balance on a credit card that they want to include in the bankruptcy to discharge it. When you reaffirm the debt for the automobile you will see that the credit union included the credit card and auto loan together making you owe a large amount if you want to keep the car. In this case, it would probably be the best to give the car back and include the entire amount in the Chapter 7. This is something that consumers should be aware of even if they're not considering bankruptcy. Credit unions usually have attractive rates on car loans but they usually include one of these clauses. With so many landmines and a bankruptcy filing, it's very important to consult with a local bankruptcy attorney to avoid any problems that might arise in your personal situation.
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