FILING CH. 7/ RETURN CAR BEFORE FILING/NAVY FEDERAL

[2009]

Hello everyone! Need some advice. First of all going through a divorce, can't afford to pay all the credit cards that I have. Had the fee for the retainer, but had death in family missed work so I needed to keep the money. In the process of trying to come up with the retainer fee again. Have an auto loan with Navy Fed and some other accounts.. credit card, overdraft, car loan. Well, Navy Fed says that if I dont make the credit card payments that  they can reposse my car for collateral even though I pay the car loan on time. I dont have money to pay on the credit card and the lawyer told me only to pay the car loan. So, now what if I just give them the car back now before I file and go get some other little car. If I return the car first, get another car and then file BK , how will the returned car show up? Will it show repossed since I havent filed as of yet or when i file can it be included in the BK?

Not sure what to do, I am very stressed. Need advice!

[MarineVietVet]

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@2009 wrote:

Hello everyone! Need some advice. First of all going through a divorce, can't afford to pay all the credit cards that I have. Had the fee for the retainer, but had death in family missed work so I needed to keep the money. In the process of trying to come up with the retainer fee again. Have an auto loan with Navy Fed and some other accounts.. credit card, overdraft, car loan. Well, Navy Fed says that if I dont make the credit card payments that  they can reposse my car for collateral even though I pay the car loan on time. I dont have money to pay on the credit card and the lawyer told me only to pay the car loan. So, now what if I just give them the car back now before I file and go get some other little car. If I return the car first, get another car and then file BK , how will the returned car show up? Will it show repossed since I havent filed as of yet or when i file can it be included in the BK?

Not sure what to do, I am very stressed. Need advice!

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That's a new one for me. I never knew CC's were backed by any collateral. I thought all CC's were unsecured debt? Perhaps Navy Fed is blowing smoke? I just don't know. I'll let others with more knowledge about this comment.

I hope you get the answers you're seeking.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[haulingthescoreup]

The only thing that I can think of is that this is a variant of, if you have both a banking account (like a checking account), and a credit account (like a CC), and you get behind on the CC, at the same banking instituition, and you get behind on the credit account, they can suck the money due out of your bank account. (I'm certain that there is a more elegant way of expressing this. )

An interesting twist that, as they have an ownership interest in your car, they feel that they can go after it as if it were cash in your checking account.

No idea if this is legally permissible, but it's an excellent reason to have your banking in one place and your credit accounts somewhere else. 

[chasmith]

There is something called a "bankers right of offset" that allows a bank to "offset" balances in your checking / savings accounts to debts you owe.  I understand from my BK attorney that banks cannot use this against personal credit card accounts, but didn't test that, I had one checking account with a CC lender but kept $25.00 in it at the time I stopped paying.  I did years ago have a bank empty my checking account on a mortgage arrearage but that was a commercial checking account and commercial mortgage.

I'm a customer of NFCU (post-BK) and can tell you their membership agreement sets out cross-collateralization, any cash balances you have with them can be offset against debts.  I don't know if they can actually do this but remember credit unions are not banks and not always subject to exactly the same regulations. 

I don't know whether they can also declare a default on all your loans if you default on any, but I wouldn't risk it.  I would open a checking account elsewhere and keep minimal positive balances at NFCU.  Then talk with them  about options.  Ask your lawyer if he/she has specific experience with NFCU, they are good to deal with as a customer in good standing but tenacious collectors.

Anything you do can be negotiated.  Turning in the car could be called a "voluntary repossession" but they don't want to go through repossession any more than you do, so you might negotiate a non-disclosure that prevents them reporting it to the CRAs.  That might drop the car loan off your CR entirely but I think that would be preferable to showing a repossession, even voluntary.

[Anonymous]

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@2009 wrote:

Hello everyone! Need some advice. First of all going through a divorce, can't afford to pay all the credit cards that I have. Had the fee for the retainer, but had death in family missed work so I needed to keep the money. In the process of trying to come up with the retainer fee again. Have an auto loan with Navy Fed and some other accounts.. credit card, overdraft, car loan. Well, Navy Fed says that if I dont make the credit card payments that  they can reposse my car for collateral even though I pay the car loan on time. I dont have money to pay on the credit card and the lawyer told me only to pay the car loan. So, now what if I just give them the car back now before I file and go get some other little car. If I return the car first, get another car and then file BK , how will the returned car show up? Will it show repossed since I havent filed as of yet or when i file can it be included in the BK?

Not sure what to do, I am very stressed. Need advice!

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Unfortunately they are probably legally able to do that.

Check your auto loan contract carefully and it will likely include various scenarios under which they can accelerate your loan.  One common clause is apparent insolvency and / or delinquency on other accounts.  Not all banks will do this, mind you, but Navy Federal is one the most aggressive financial institutions out there when it comes to dealing with debtors.  They also usually ban those who cause them a financial loss -- even in BK.

Depending on your equity in the car, you might want to sell it, pay off your loan, pocket the difference and THEN stop paying on your NFCU credit card. 

[2009]

Thanks for all the advice. Now, do you think I should tell Navy Federal that I am going to file Bankruptcy? I was thinking if I told them, then maybe they would leave me alone about the credit card and I would just keep paying my car loan since I want to keep the vehicle. Does everybody think this is a good idea?

Any advice would be greatly appreciated!

[Anonymous]

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@2009 wrote:

Thanks for all the advice. Now, do you think I should tell Navy Federal that I am going to file Bankruptcy? I was thinking if I told them, then maybe they would leave me alone about the credit card and I would just keep paying my car loan since I want to keep the vehicle. Does everybody think this is a good idea?

Any advice would be greatly appreciated!

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I am not sure what purpose would be served by calling Navy Federal to inform them of your upcoming bankruptcy rather then just having them notified by the court. 

Though few things in this life are certain, one of those few things is that there is no way in hell Navy Federal will leave you alone unless forced to by the Automatioc Stay provisions of the bankruptcy code.  That is just not how they operate.  NFCU has a long and strong history of doing everything just short of committing a felony when it comes to collecting debts.