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Thank You For Your Compassionate Help You Provide Others. – Barbara

“Steve,

Thank you for the compassionate help you provide to your readers. Your extensive knowledge of financial matters and the integrity and honesty with which you answer readers, telling it like it is with no beating around the bush, is a rare commodity.

Keep up the good work!

I have read your website extensively and found that your answers to many other readers questions pretty much address my situation. Unless I can substantially increase my income, I see no other choice but to file Chap 7 bankruptcy early next year.

I am a leading edge baby boomer, single, no kids, who wants and financially needs to work full-time for the money and insurance benefits. Was laid off from the last full-time and part-time jobs in my field and have not been employeed in my field since the layoffs. Forced into “early” retirement by the intersection of the economy and my age (early 60s). Unemployed / underemployed / lived on savings and credit cards the last 2 1/2 years. Started receiving early social security in July 2010, 1 year after exhausting my savings. Things are slightly more stable now, so I can start dealing with digging myself out of the credit card hole I have dug myself into.

Not exactly how I planned to spend my early retirement, but life is what it is, so I am attempting to make lemonade out of the lemons coming my way.

I am starting a small microenterprise business out of my home doing what I used to do as an employee — computer software training, but as anyone who has started a business knows, it takes time to generate consistent cashflow that you can live on.

I am grateful for what I do have — things could be much worse and there are so many struggling with worse situations — but the reality for me is that the modest resources I have / had are being overwhelmed by long-term chronic un / underemployment.

Duh, I get it — to live within your means you have to either increase your income or decrease your expenses. I have always lived modestly and frugally, even in better times, and have the discipline and skill to track my income and expenses carefully (Quicken software). But as my minister always used to say, “in the realm in which money works, there is no substitute.”

I understand that when I actually file Chap 7 I must not have any funds on deposit at the bank where the credit cards are. I am in the process of finding another bank to transfer my checking accounts to. Given the state of the banking industry in the last several years, how can I make sure the bank I choose is stable?

(1) I will be reaffirming my mortgage. I assume that moving my checking accounts to the credit union that holds my mortgage is not a good idea?

(2) Are there any websites available that provide ratings of banks, that will help me evaluate the financial stability of the banks I am considering?

(2) If #2 is no, if I provide you with the names of the banks I am considering, can you provide help in evaluating them?

Thank you in advance for your advice.

Barbara”

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The Answer

Dear Barbara,

First off, thanks for the kind words. I can definitely tell by some of the things you’ve mentioned that you have read a number of posts and listened to what I had to say.

I would not be worried about any bank that is FDIC insured. The FDIC does an amazing job of transitioning any bank that fails to new ownership. It truly is a process they have perfected and it runs smoothly.

If you want information on any bank you are considering you can check them out on the FDIC Institution Directory.

Bottom line, pick any bank as long as it is FDIC insured.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

Thank You For Your Compassionate Help You Provide Others.   Barbara
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If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Thank You For Your Compassionate Help You Provide Others. - Barbara by

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Steve Rhode

    The cross-collateral problem occurs at credit unions on loans and credit cards but I have not seen it with a mortgage. However, that does not mean that the CU would not do it but that would be something very local and not something I’ve seen on a widespread basis.

    Commercial banks don’t seem to have that problem and I’ve witnessed that accounts are only seized when pledged as collateral, under authorization from the court, or under authorization of some governmental power/process.

    I never think it hurts for you to meet with a local lawyer and to discuss your legal rights and options. It you have access to do that then please do that. But if you are planning to carry the mortgage through the bankruptcy then talking to your bankruptcy attorney about the typical local practice of the credit union may be just as helpful. The bankruptcy attorney will be able to inform you what they typically do.

  • Barbara

    Steve,
    Hmm, I thought ANY financial institution (both banks AND credit unions) could seize (or at least freeze) deposited funds if there is an issue with any secured or unsecured loan or credit card with them, hence the need to move deposited funds to an institution not connected with any debt.

    I think universities do something similar with granting of diplomas or issuance of transcripts: they hold both until all outstanding fees have been paid.

    The bank where I opened my new checking and savings accounts is totally unconnected to any of my existing debt. I did briefly consider moving my checking and savings accounts to my credit union, but quickly felt it would not be prudent to do so in light of my intended bankruptcy, even though I will be reaffirming my mortgage. BTW, I have no loans other than my mortgage at my CU.

    However, I have read some articles online that indicate even deposited funds at a financial institution NOT connected in any way to a bankruptcy can be (temporarily) frozen. True? (http://www.bankruptcylawnetwor… last paragraph).

    I took a quick look through my credit union mortgage papers and didn’t see anything that looks like a cross collateral clause, but will certainly check this out further.

    Would it be OK if I ask someone in the credit union mortgage department about whether there is a cross collateral clause in my mortgage? Or would that be tipping my hand prematurely and might cause them to suspect that I might have financial problems possibly leading to bankruptcy? Hmm, I could go to my local Legal Aid Society and pay $5 for one of their attorneys to review my mortgage papers for such a clause . . .

    A google search on “credit union cross collateral claim” yielded this information:
    (1) http://www.markrubinlawyer.com
    Note particularly the first and last articles . . . I found other similar articles which *seem* to indicate that cross collateralization primarily affects car loans and not real estate. Not sure if this is true, just pointing out info I found online.

    (2) http://findarticles.com/p/arti
    Advice given to CUs by an attorney about managing a loan included in a CU member’s bankruptcy! See item #3.
    Thanks, Steve!
    Barbara

  • Steve Rhode

    Oops. Sorry I missed it.

    In general I’m not a huge fan of credit unions for only one reason, cross collateral claims. Meaning, if you have a loan or credit card with them and a deposit account they will hold your deposit account hostage until the loan issue is resolved. Some credit unions are worse at this than others. Banks don’t do this.

    I would not move the accounts to the credit union that holds the mortgage.

    Steve

  • Barbara

    Steve,
    I came to the same conclusion about FDIC . . . all the banks I am considering have similar features for basic checking accounts and are FDIC insured, so I went with the bank with the most convenient locations.

    For some reason, you did not comment on question (1):
    (1) I will be reaffirming my mortgage. I assume that moving my checking accounts to the credit union that holds my mortgage is not a good idea?

    Thanks,
    Barbara

  • Barbara

    Steve,
    I came to the same conclusion about FDIC . . . all the banks I am considering have similar features for basic checking accounts and are FDIC insured, so I went with the bank with the most convenient locations.

    For some reason, you did not comment on question (1):
    (1) I will be reaffirming my mortgage. I assume that moving my checking accounts to the credit union that holds my mortgage is not a good idea?

    Thanks,
    Barbara

    • http://GetOutOfDebt.org Steve Rhode

      Oops. Sorry I missed it.

      In general I’m not a huge fan of credit unions for only one reason, cross collateral claims. Meaning, if you have a loan or credit card with them and a deposit account they will hold your deposit account hostage until the loan issue is resolved. Some credit unions are worse at this than others. Banks don’t do this.

      I would not move the accounts to the credit union that holds the mortgage.

      Steve

      • Barbara

        Steve,
        Hmm, I thought ANY financial institution (both banks AND credit unions) could seize (or at least freeze) deposited funds if there is an issue with any secured or unsecured loan or credit card with them, hence the need to move deposited funds to an institution not connected with any debt.

        I think universities do something similar with granting of diplomas or issuance of transcripts: they hold both until all outstanding fees have been paid.

        The bank where I opened my new checking and savings accounts is totally unconnected to any of my existing debt. I did briefly consider moving my checking and savings accounts to my credit union, but quickly felt it would not be prudent to do so in light of my intended bankruptcy, even though I will be reaffirming my mortgage. BTW, I have no loans other than my mortgage at my CU.

        However, I have read some articles online that indicate even deposited funds at a financial institution NOT connected in any way to a bankruptcy can be (temporarily) frozen. True? (http://www.bankruptcylawnetwork.com/2009/09/23/banks-and-credit-unions-can-keep-money-when-bankruptcy-is-filed/, last paragraph).

        I took a quick look through my credit union mortgage papers and didn’t see anything that looks like a cross collateral clause, but will certainly check this out further.

        Would it be OK if I ask someone in the credit union mortgage department about whether there is a cross collateral clause in my mortgage? Or would that be tipping my hand prematurely and might cause them to suspect that I might have financial problems possibly leading to bankruptcy? Hmm, I could go to my local Legal Aid Society and pay $5 for one of their attorneys to review my mortgage papers for such a clause . . .

        A google search on “credit union cross collateral claim” yielded this information:
        (1) http://www.markrubinlawyer.com/credit-unions-cross-collateral/
        Note particularly the first and last articles . . . I found other similar articles which *seem* to indicate that cross collateralization primarily affects car loans and not real estate. Not sure if this is true, just pointing out info I found online.

        (2) http://findarticles.com/p/articles/mi_qa5328/is_199905/ai_n21438744/
        Advice given to CUs by an attorney about managing a loan included in a CU member’s bankruptcy! See item #3.
        Thanks, Steve!
        Barbara

      • http://GetOutOfDebt.org Steve Rhode

        The cross-collateral problem occurs at credit unions on loans and credit cards but I have not seen it with a mortgage. However, that does not mean that the CU would not do it but that would be something very local and not something I’ve seen on a widespread basis.

        Commercial banks don’t seem to have that problem and I’ve witnessed that accounts are only seized when pledged as collateral, under authorization from the court, or under authorization of some governmental power/process.

        I never think it hurts for you to meet with a local lawyer and to discuss your legal rights and options. It you have access to do that then please do that. But if you are planning to carry the mortgage through the bankruptcy then talking to your bankruptcy attorney about the typical local practice of the credit union may be just as helpful. The bankruptcy attorney will be able to inform you what they typically do.

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