Question Cross collateralization between checking account and mortgage and HELOC?

[StartinOver]

I have heard that banks will do things like hold the title of cars, even if the car loan is paid, on individuals who have credit cards discharged in bankruptcy.

We have our checking accounts (1 for household finances, 1 each for management of expenses for cars and day to day) at the same bank that holds the 1st and HELOC on our slightly underwater house.

Our income has been sharply curtailed (career change for him after long unemployment and now sudden unemployment for me after a steep pay cut a year ago) and we'd already exhausted any cash reserves years ago. Unless a miracle happens and I find a job at my old salary from before the paycut, bankruptcy and perhaps even surrendering the home is likely. Waiting on a HAMP modification without much hope, right now.

We stopped paying on credit cards ages ago, could never save up anything. We missed the August 1, and Sept 1 mortgage and HELOC payments, and I need that money to pay an attorney. Will they just take it from the checking account to satisfy the mortgage when they start processing whatever it is they are processing in there?

Should I open a new checking account somewhere else, and what are the criteria for selecting a new bank (besides, conveniently around the corner and not associated with any of my defaulted credit cards?)

[keepinitreal]

I'd definitely recommend you open a new checking account today, at the most convenient place that will accept you and you don't have a loan with. Write a check from your current bank for almost all of the money in your current account and deposit it into your new account. If you're receiving unemployment, move auto-deposits to your new checking. Cancel any auto-payments from your old account.

There is a good chance that the bank you owe 2 mortgage and HELOC payments to will use their right of set-off to remove money from your checking account with that same bank.

Good luck!

[Floridagail]

Most definately open new bank account, No associations with your mortgage or bills. They could take your money why take a chance. We are in same boat with you. Cu did try to take my money. You will have no trouble opening new bank acct as long as no outstanding checks out there. I was worried since I had stopped paying my ccs for 18mos b4 I got sued and filed . I opened a new checking a few months before filing with no problem. I would stay away from wells fargo and wicovia , as they have been know to freeze accounts even with no money owed to them. in previous posts. Good Luck