Legal Question in Bankruptcy in New York

Re: Credit Union and Bankruptcy

OK. This is kind of weird, but the credit union is actually acting within the law -- and the debt did get properly discharged if it was properly listed on your petition 14 years ago.

A bankruptcy discharge is nothing but a court order telling Creditor that Creditor cannot initiate contact with Debtor or pursue any collections against an outstanding debt ever again, and that the debt must be listed on credit reports as "BK" or "DISCHARGED", and the fact of the debt must fall off the credit report after a certain time (10 years or less). It does not erase the fact of the debt for Creditor, and it creates for Creditor the sting of their having to eat that loss. Creditor doesn't like that sting, especially when Creditor is a credit union, which is usually a member-owned not-for-profit entity.

That court ordered discharge says nothing to Creditor about purging the debt from their internal records.

Assuming it was listed correctly, the public record of the debt was discharged (Creditor can't initiate contact with you or pursue you to collect on the debt, and it should have by now fallen off your credit report). But Creditor doesn't want to do business with anyone who files bankruptcy against them ever again in this lifetime, so Creditor keeps the debt open on their internal books. Their internal books are not public record, so the court order isn't violated, but it keeps them from ever doing business with you again. They offer you the opportunity to do business with them again by paying off the old debt -- probably with massive interest. Nasty, huh?

Creditors, especially credit unions, do have lifelong memories. They know who filed for bankruptcy protection a lifetime ago, and they often take steps to avoid doing business with that person or entity again.

A lender is allowed to decline to open an account (of any sort) for someone who filed for bankruptcy protection and received a discharge for a previous loan made by that lender, no matter how long ago. It's one of the untouted but nasty side effects of bankruptcy.

However, this credit union is not the only account holder in the world. Another credit union or bank would not have access to those internal records, so you should have no trouble opening an account somewhere else, assuming you've kept your nose clean since the bankruptcy discharged.

THE INFORMATION PRESENTED HERE IS GENERAL IN NATURE AND IS NOT INTENDED, NOR SHOULD IT BE CONSTRUED, AS LEGAL ADVICE. THIS POSTING DOES NOT CREATE ANY ATTORNEY-CLIENT RELATIONSHIP BETWEEN US. FOR SPECIFIC ADVICE ABOUT YOUR PARTICULAR SITUATION, CONSULT YOUR ATTORNEY.