Having to give back auto because of CU Cross collateralization

[Anonymous]

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.

[DaveInAZ]

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@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.

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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!

[Anonymous]

@DaveInAZ
Thank you again for your advice!

[Anonymous]

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.

[DaveInAZ]

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@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.

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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.

[Anonymous]

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.

[Anonymous]

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

Good luck!

[MyDataMyChoice]

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.

[Anonymous]

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.

[zerofire]

*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.