topic Re: Having to give back auto because of CU Cross collateralization in Bankruptcy

Having to give back auto because of CU Cross collateralization

Anonymous — Fri, 07 Dec 2018 16:48:47 GMT

I will never again do any business with a CU. They all seem to have that loophole where they can attach any unsecured debt to a secured debt without cause. In my case it was a VERY sizable credit card that blew up on me. Im able to keep paying the auto ontime. I have never been late on it. But since the CC went late, they tacked it on the auto. And in order to pay off the auto, I will be paying off the CC too. The CC is almost as much as the auto was new. So there is no way Im going to pay on this for 15 years or pay double for the car. So they have forced me to give it back and file BK. They could have easily let the two be separate, and they wouldnt be eating the car overage as well, but I guess eating an extra $20k in a bk for a CU that has 50 billion dollars in assets is a drop in the ocean. Oh well, I really liked that auto. Its currently up to date, but wont be for much longer. Should go 30 days late in the next two weeks. Im wondering how long it will take before they motion to come get it? I have been reading that even with the BK filed, they will likely wait until its 90 days or more late to start the repo process. Their loss.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Sat, 08 Dec 2018 04:59:14 GMT

Edited post. I misunderstood what you posted initially. Sorry, that is a crappy situation.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Sun, 23 Dec 2018 01:25:32 GMT

I also have one car financed with my local CU. I also have a small limit credit card with them as well as a personal loan. During my consultation with the bankruptcy paralegal she explained to me that CU's do have this cross collateral going on. I told her I would like to keep my car. Never been late. She told me that I would be able to reaffirm and the CU didnt have a choice but to. Sounds good but we shall see when I finally file. If this isnt the case then they can have it.

Re: Having to give back auto because of CU Cross collateralization

FireMedic1 — Sun, 23 Dec 2018 09:05:12 GMT

Well that suckas. But. I would still make payments until they get it. If you havent been late on it. Why have a few or 1 30 day lates on your report just because the situation sucks. The car may go away but the lates stay for 7 yrs.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Sun, 23 Dec 2018 15:49:35 GMT

Firemedic, will the CU not just let them keep the car If they keep paying and keep it current?

After bankruptcy will lates show back up? Right now my credit report shows payment history unknown on the accounts that are in BK. Does this mean the lates will come back upon discharge?

Re: Having to give back auto because of CU Cross collateralization

FireMedic1 — Mon, 24 Dec 2018 00:32:40 GMT

Now I'm not a CU expert at all. When I reaffirmed Cap1 didnt report during the BK proceeding. But then it kicked in again reporting after DC. Most banks if you do not reaffirm. Most will let you keep the car as long as payments are made but they will not report to the CRA's. Any lates before during or after a BK will still report. Pre-BK lates dont go away because of the BK. Once late always late. Hope that helps.

Re: Having to give back auto because of CU Cross collateralization

DaveInAZ — Mon, 24 Dec 2018 16:43:14 GMT

Yes, that's true for most bank, but CUs are a different story. Most CU's require you to reaffirm or they will repossess - for most banks 30+ days late on payments is the only thing that makes you in default, but most CUs have a clause in the loan docs that just filing BK makes you in default, so even if current on payments they can repo if you don't reaffirm. And many CUs have the cross-collaterization clause the OP described, so if you default on an unsecured loan from them - CC or personal loan - and you also have a secured loan with them - car, mortgage or Home Equity - and you default on the unsecured loan it suddenly becomes secured by your car or home. I like CUs and most of my banking accounts are with CUs, but as they are member owned and non-profit they're a little tougher on defaults as they don't have the loss reserves the big banks have.

And knowing about CU cross-collaterization my Home Equity LOC is with Penfed but I have no other credit accounts with them, and my car loan is with DCU but I have no other credit accounts with them. I'm Semi retired and have very secure income - Social Security and a part time job with the local county, coming up on 7 years with them. So I'm not concerned about not being able to meet my personal finance obligations, but it's also best to keep things separate should the unlikely become the unexpected.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Mon, 24 Dec 2018 17:16:37 GMT

I did read in my car loan contract that filing bankruptcy would put me in default even though I've never been late on my car note. The paralegal said I could reaffirm the car it was my choice but the more I think about it Im still unsure. The balance on the loan is $15,000. My car note is $325 a month at 4.75% interest rate. The reason my payment is high is because of the trade in at the time of purchase added on to the loan made the payment what it is. I have a 2016 Altima and it has 84,000 miles. It's my only car. I'm open for suggestions.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Mon, 24 Dec 2018 17:19:11 GMT

Not to mention at mile 64000 I had to replace the transmission. Even though the paralegal gave me the okay I'm still undecided.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Mon, 24 Dec 2018 17:43:17 GMT

This is just my opinion and you have to do what you think is right.

That car needs to go in BK and you get another one. The car loan alone is more than the car is worth without adding the credit card on top of it. Plus, that car is most likely on its last leg anyway.

You'll have to pay higher interest on the newish car but if you do research on what cars (mileage, year,etc) can be refinanced later and factor those details into your new purchase, you can refinance in the future when your credit is better. OR you can buy a cheap car on craigslist and drive it until your credit is better. Even if you go craigslist route you're probably going to have a car as reliable as the one you have now.

As far as whether to make the payment or not, I wouldn't. You're getting the worst hit with the BK anyway. You discharge and rebuild like the rest of us and you'll be better for it.

The point of BK is to get out of the hole completely not keep part of the hole.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Mon, 24 Dec 2018 17:59:39 GMT

Thank you so much for your feedback. I've been back and forth with this since I left the law office. The paralegal also told me that if I needed to get another car before I get my discharge then I could do so after I file that is if I decided not to keep my car. Does this even sound right? This is all so overwhelming.

Re: Having to give back auto because of CU Cross collateralization

DaveInAZ — Mon, 24 Dec 2018 18:45:56 GMT

@Anonymous wrote:
Thank you so much for your feedback. I've been back and forth with this since I left the law office. The paralegal also told me that if I needed to get another car before I get my discharge then I could do so after I file that is if I decided not to keep my car. Does this even sound right? This is all so overwhelming.

Well, most advise not to incur any new debt until after your discharge, but many people do and if you do you'll probably be OK, especially since the paralegal told you that your could. Check Kelly Blue Book - kbb.com - for your car's value. I did, but there's several models of the Altima, so I chose the middle value model and came up with a trade-in value of $7500-$9000 and private party sale value of $10-$12,000, so your loan is under water + the amount of the CC. And if you reaffirm the car loan you are responsible for the full amount of the loan, and with the loan amount more than the value of the car that is not a good idea, should it get totaled in an accident you'd be on the hook for what's left on the loan after insurance pays the car's value. And if you decide to not reaffirm and let them have the car stop making payments as it's just throwing money away, but if you don't want a late payment on your credit report for 7 years stop making payments less than 30 days prior to filing, once you file they can't report a late payment as that would be an attempt to collect a debt protected in BK, a big no-no.

Good luck!

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Mon, 24 Dec 2018 18:58:22 GMT

@DaveInAZ
Thank you again for your advice!

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Mon, 24 Dec 2018 22:56:36 GMT

Since I filed bankruptcy, I have gotten a hand full of offers in the mail to get a new car... at least one of them said before discharge and it was from a reputable car lot here in town and I didnt even look at the rest.

Re: Having to give back auto because of CU Cross collateralization

DaveInAZ — Tue, 25 Dec 2018 16:43:20 GMT

@Anonymous wrote:
Since I filed bankruptcy, I have gotten a hand full of offers in the mail to get a new car... at least one of them said before discharge and it was from a reputable car lot here in town and I didnt even look at the rest.

Oh yeah, I remember now - I filed Ch.7 in Sept. 2010 and it was more than a handful of offers from car dealers, it was dozens and some even out of state. Fortunately my car was only 5 years old, in great shape, and all paid for and the value was low enough to be exempt.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Thu, 27 Dec 2018 03:35:00 GMT

Hi everyone. Im just circling back on this. To clear some things up, this is not a 7 its a 13. And in a 13 you do not reaffirm car loans. You have to pay them outside of the plan. There is no reassumption. Just business as usual. They get disconnected from the 13 plan, and thats it. But in this case, there is no way to do that. The CU will not budge. They are going to LOSE their ass on it and I wont be liable for it at all. It is a good thing for me to get rid of that negative car debt, but its going to kill my parent's credit who co-signed for me. There is no way around it. And the CU is going to try and collect the overage on the car loan plus the CC from them now. Its not good. THey will probably file a 7 though and get rid of some CC debt they have on their own. So it will work out. And I was prepared to keep that car and pay it every month no problem if they would have worked with me. But oh well.

The 13 is on and Im filed. No more CCs for me. You wont see any threads from me asking how to get credit restablished. No way. Im not to be trusted with credit. Im going to get a $3500 car that I will pay cash for and thats it. Sucks but its better than hundreds a month plus insurance on a depreciating asset.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Thu, 27 Dec 2018 04:32:55 GMT

Oh! That's a different situation all together... something you and your parents to decide together. That stinks.

Good luck!

Re: Having to give back auto because of CU Cross collateralization

MyDataMyChoice — Thu, 27 Dec 2018 13:13:44 GMT

Do your parents have a credit card or bank with the credit union?

If Not, they cannot require your parents to be responsible for your credit card (the cross collateral clause is only valid for you)

Your parents can continue to make the auto payments as usuall to avoid any negative reporting - or opt to settle/buy it outright. Credit Unions are easier to work with than Big Banks - get management involved (Your parents would have most luck trying to redeem - or refi the car - or sell it. Have you listened to dave ramsey? He deals with this often - Ive heard him mention asking to refi the car in just parents name since you are going Bankrucpt - and leave the neagative equity as unsecured - limits there loss - they still may get burned a bit - but a 5K loss instead of a 25K loss is better in there eyes.

Re: Having to give back auto because of CU Cross collateralization

Anonymous — Sat, 29 Dec 2018 04:06:09 GMT

Thanks for your reply. However, you are incorrect. They can and are going to try and collect both the CC debt and the auto loan overage once the car has been taken. Even if my co is not a member or has any credit with the CU. They are the cosigner, and in those loan docs the CU has taken the liberty to cross collerallize the CC to the auto. All thats left now is to take the auto, auction it off and try to collect from my parent the balance from the CC (now considered auto debt), plus the overage from the sale of the vehicle. This has been verified by my attorney. Thats it unfortunately.

Re: Having to give back auto because of CU Cross collateralization

zerofire — Sat, 29 Dec 2018 18:51:19 GMT

*whistles* That is one heck of a loan agreement. Coupling unsecured debt to a secured loan is pure genius. Throw in the co-signer after that and it is basically an inverted pyramid. No wonder the CU was happy to loan you that much. They basically had assurances on assurances and the only thing that they had to wait on was the monthly payment or for everything to fall over. I do not think that there is any way to save this and it sucks that your parents got lopped into it as well.