If you are going to borrow money, the best place to do so is usually at a credit union. However, a credit union is the worst place to have a loan if things go wrong. Even in bankruptcy court, credit unions have special protections which allow them to torment you financially. Beware of these credit union traps and tactics:
1. If you have a car loan and a credit card with a credit union, your car can be repossessed if you miss a payment on the credit card. That’s right. You can have perfect payments on the car loan, but lose your car if you fall behind on the credit card. That is because credit unions put a clause in your credit card contract which allows them to take your car if you miss either the car payment or credit card payment.
2. Your credit union bank account will be closed if you file either Chapter 13 or Chapter 7, if you do not pay all credit union debts in full.
3. If you have money in your credit union account and you have debts with the credit union, they will likely seize the money in your account in the event you file bankruptcy.
4. Sometimes a credit union will play games with your bank account if you file a Chapter 7. I had one case where the credit union would accept cash deposits, but not deposits of checks.
5. The credit union may freeze your debit card when you file Chapter 13 or Chapter 7. This happened in a Chapter 13 case, even when the plan provided for full payment of the credit union debt. The customer had a long history of paying his bills, but the credit union simply did not care.
Here is a tip. Have an account at a bank where you have no loans or debts. Never, ever, directly deposit your paycheck at a credit union (or bank) where you have loans. This will avoid all of the credit union’s tricks and games.