I have a loan with a local credit union. It is an unsecured loan. They are threatening to exercise their "legal rights". What does this mean? I only have a savings account with them, which I was forced to keep open because of this loan. The balance is about one dollar. Will they send this to a collection agency similar to the credit card companies?

They most likely will yes... they will try whatever they can to get their money.

How much was the loan and how long ago did you stop making payments

I owe about $4300 and I stopped making payments about 3 months ago.

They may send it to a collection agency, or if a smaller credit union may just sue you and get a judgement.