Avoid Making Your Debt Situation Worse
A lot of thought goes into picking the bank or credit union where you hold your money. Perhaps they provide many appealing financial services beyond just a place to keep your money. Maybe they offer a great savings interest rate or have outstanding customer service. Maybe your family has belonged to that bank or credit union for decades.
It can be natural then, when it comes time to get a loan (car loan, home loan, any type of loan), to choose them. It may even be hard to imagine why you wouldn’t take advantage of at least one of the various credit options they have to offer. They’ve treated you well all these years – what could go bad now?
But there’s something about loans from your bank or credit union which make them worse than loans from other banks. That is the bank’s right to setoff.
What Is Setoff?
Simply put, setoff means banks can generally take money out of your bank account without your permission to satisfy a loan obligation you owe them.
Let’s say you lose your job, get divorced, become sick, your car dies, or any number of real-life situations happen to you and you become unable to meet your loan payment to your bank. You may think your bank or credit union will work with you to find a solution you like. After all, you’ve probably been a loyal customer for years, and they graciously granted you the loan.
But in some cases, the bank will simply take money directly from your bank account. To make matters worse, they might accelerate your loan and take the entire loan balance from your account. For many borrowers, this means the bank then leaves them with nothing.
If you’re already in a difficult debt situation, this will only make your financial problems worse.
There have even been cases where the bank emptied the borrower’s bank account and then hit them with overdraft fees because their outstanding expenditures at the time their account was raided suddenly could not be fulfilled.
Add onto that your upcoming expenses (house payment, necessary car repairs, anything), and you could find yourself in serious financial trouble.
Could Bankruptcy Help Your Financial Situation?
If you’re falling behind on your bills, and debt is piling up to the point that you can’t see a sensible way out, it may be time to consider filing for bankruptcy. This can sound like a scary, life-shattering choice, but it can actually be a smart way to get your financial life back on track in a faster and better way.
Bankruptcy can help you discharge much of your debt and get a fresh start. And a good bankruptcy attorney, such as Colorado-based Wink & Wink, will work to help you keep as many of your assets as possible. Filing for bankruptcy doesn’t mean creditors then swarm in and take all your things, and you’re left out on the street with nothing. Not at all.
Bankruptcy also doesn’t mean you’ll never be able to get a loan or own a home or car again. It doesn’t mean you’re financially ruined. Far from it.
Bankruptcy is not a decision that should be taken lightly though. That’s why it’s essential you first consult a bankruptcy law firm, such as Denver bankruptcy attorneys Wink & Wink. They can review your case and help you make the right choices to ensure you keep your assets and avoid any further costly mistakes.
Borrow Only from Banks Where You Don’t Keep Your Money
If you borrow money only from banks or credit unions where you don’t keep your money, you will not be subject to a bank’s right to setoff funds in your bank account. This is because setoff does not exist across different banks.
For example, let’s say you miss a credit card loan payment with “Bank A” but keep your money at a different bank we’ll call “Bank B.” Because you have no money with Bank A, they have no right to setoff funds held in Bank B. They must go through the proper legal channels to get anything from you.
When Bank A cannot setoff funds in your bank account, it has more motivation to work with you. After all, Bank A would rather get paid than hire a lawyer. Of course, their willingness to work with you is limited, usually only for three to six months. If you can’t start paying during this time, they might then hire a lawyer and pursue a judgment against you.
However, absent the right of setoff, the legal process of getting to your bank account now requires suing you to get a judgment and then a writ of garnishment. This is an additional two to three months from when they start the process.
In total, you’ve just bought six to nine months or more by not banking where you borrow.
Still, the risk of lawsuits and the creditor’s rights to collect upon obtaining a judgment are good reasons to pursue debt relief as soon as you start missing payments to creditors. Not banking where you borrow will give you some time and flexibility, but it is best to have a plan.
Therefore, it is a good idea to speak with a debt relief lawyer, such as Denver bankruptcy law firm Wink & Wink, to find out your rights and develop a plan for your debt. They can help you determine if filing for bankruptcy is the sensible choice or other debt settlement solutions.
Bankruptcy in Colorado
For Colorado residents struggling with overwhelming debt, it may be time to consider filing for bankruptcy to reduce your financial burden. Call Wink & Wink at 303-410-1720 or contact us online to learn what steps you can take to get back on solid financial ground again.