How do you deal with credit union debt?

[Peter54]

I am helping a co-worker out who is going through a very rough time financially. I have helped him draft letters to his creditors who have been positively responsive, all apart from his local credit union.

He has €2000 shares but has an outstanding loan of €3,500. The credit union have refused to offset the shares against the loan. He continues to make a payment each week but it is not covering the interest.

The CU have threatened to write off the debt, close his account and said his shares would be lost?? This he nor I can understand??

We would be happy to hear from anybody with experience of CU debt.

Thank you.

 

[callybags]

On the face of it, if the credit union were to do as they have intimated, then your colleague would be better off to the tune of €1,500.

Perhaps he should let them carry out their threat.

 

[Slim]

Hi Peter.

That might, in fact be a useful move. If the CU writes off the debt, his savings will be set off against the loan, leaving approx €1,500 owing. In addition, the interest will cease accruing on the loan. This will enable him to pay the balance off faster. One downside is that they may be members of Irish Credit bureau and that will be reflected on his credit history but if he has other creditors anyway, that may be irrelevant. My advice would be to write again to the CU, insisting on the savings being set off against the loan with a proposal to clear the balance or he will stop paying and let them write it off.

 

[Peter54]

Thank you both for your quick responses.

Yes, I agree that it would be best if they wrote off the debt by using his shares and then he could swiftly begin making payments on the remainder of the loan.

They did however insist they would not use his shares against the loan as they held no collateral to secure the €1,500 that would be outstanding. My guess is they are looking for him to give them a personal guarantee.

I will draft another letter today. Hopefully the manager can see that this problem could be remedied quickly if they would work with him.

 

[demoivre]

Thank you both for your quick responses.

Yes, I agree that it would be best if they wrote off the debt by using his shares and then he could swiftly begin making payments on the remainder of the loan.

They did however insist they would not use his shares against the loan as they held no collateral to secure the €1,500 that would be outstanding.

Either way there is €1500 outstanding - the credit union's exposure doesn't increase by offsetting the €2000 in shares against the €3500 loan. I would make a request under Section 32c of the CU act to do the offset.

 

[Slim]

Either way there is €1500 outstanding - the credit union's exposure doesn't increase by offsetting the €2000 in shares against the €3500 loan. I would make a request under Section 32c of the CU act to do the offset.

Yes, they are really just trying to bluff your friend into making what they think would be a more favourable settlement. If your friend tells them he will stop paying until they write it off, he will save the repayments in the meantime which he can then pay off the loan.