Bank or credit union goes bankrupt and loans get called back - possible? | Investing | Discussion forum

In the case of a bank or credit union going bankrupt, the administrator will typically have the authority to sell the assets of the institution, including loans such as mortgages, HELOCs, and LOCs, to recover as much of the funds as possible for the creditors. However, it is unlikely that the administrator would demand early repayment of these loans from borrowers before their maturity date, as doing so would likely cause significant financial hardship for the borrowers and could have broader economic consequences.

As for the second part of your question, it is possible for a GIC provider to buy back a GIC from the lender if they have a provision for early redemption in their terms and conditions. However, it is not common for GIC providers to do so solely because interest rates have gone down. Usually, GICs have a fixed term and a fixed rate of interest, which means that lenders have agreed to lock in their funds for a specified period, regardless of market fluctuations in interest rates.

In terms of historical examples, during the 2008 financial crisis, several banks and financial institutions went bankrupt, and their assets, including loans, were sold off to recover funds for creditors. However, it is important to note that the specifics of each bankruptcy case will vary depending on the circumstances, and there is no universal rule for how bankruptcies are handled.