Paid off CU Car loan that was reaffirmed. CU now holding title until debt is paid.

[Silver26]

Discharged a little over 2 years ago. Reaffirmed my car loan with our CU. I paid off the car loan a few weeks ago and now they are holding my title and saying that they will repossess my car to pay of my discharged credit card with them. Is this correct? Did we just get screwed? I have a call into my attorney already but I was hoping for some insight. Thanks

[justbroke]

You would need to look at the reaffirmation agreement to determine whether it included the so-called "cross-collateralization" of the other debts! As you may already know, credit unions cross-collateralize all of your accounts together. This is why CUs are able to offer awesome credit limits and superior service. They tie everything to your "secured" debt where there is collateral. When you obtain a car loan from them, the car secures all the other accounts as well (including other car loans). This is clearly in the CU's agreements for any loan product.

Now, as for whether you reaffirmed the credit card debt at the same time you reaffirmed the car, is a question of what's in the reaffirmation agreement. That will tell you whether they are in violation of the permanent discharge injunction or not. Right now, only your attorney can tell you if you had the cross-collaterilization removed as part of the reaffirmation agreement. It reads as though the CU still has the accounts connected in their system. Hopefully your attorney negotiated the removal of the cross-collateralization of the car from the other credit products. If not, this could interesting since it's a credit union and the credit cards were actually "secure" debt tied to the equity in the vehicle.

I apologize for not having better news for you, but this is going to take some research by your attorney. Worse case is that you signed a reaffirmation agreement which included the cross-collateralized debt and you actually need to pay the debt. Most judges would not approve such a reaffirmation agreement, but those reaffirmation agreements signed by attorneys as not creating an undue hardship (box was not checked) are valid and enforceable.

[Silver26]

From what I can see on the reaffirmation agreement it says nothing about cross collateralization and only references the debt that was owed on the car. The credit union is saying since I agreed to the reaffirmation that reinstated the cross coll. They said they could not come after me at all for the credit card debt but could repo my car to pay some of it off. These questions were brought up to my attorney years ago who assured me it was fine. I would have never reaffirmed the car if this were the circumstance and I assume no attorney would ever tell their client to do so.

[justbroke]

You should have had an explicit agreement, in the reaffirmation agreement terms, that that cross-collateralization was removed or in another agreement. The problem is, the reaffirmation of the secured debt -- with the cross-c in place -- attached the debt to the car. Now, it is correct that they can't come after you directly for the unsecured debt, but the car secured that debt. So, they can go after the car.

This is purely a question of whether you reaffirmed the cross-collaterizlied debt when you entered into the reaffirmation agreement. I have some caselaw which suggests that the cross-c debt is still secured by the vehicle unless it is explicitly in the reaffirmation or other agreement. I'm doing some more research and it will be a while before I can list some cases. This is definitely a question for your attorney since this could be an argument over just what constitutes the abandonment of the collaterialization clause in the original vehicle loan. Nothing could have modified those terms except for an explicit modification or the reaffirmation agreement (which also can modify the terms).

For others, when dealing with credit unions, you must absolutely have them remove the cross-collaterizaition by agreement or in the reaffirmation agreement when you are reaffirming a secured debt!

[poorpoorpoor]

Hello, Silver26. I will be filing Ch. 7 early summer. So sorry to hear that you are going through this. I currently have concerns about my secured and unsecured debt with BECU. I have a car loan and two unsecured loans and have been researching about cross-collateralization agreements on my accounts, but haven't found anything that stands out online and I'm not quite sure what to look for in my loan documents - LOC, credit card, and car loan. I have no idea of what to do about my car - whether to continue making on payments on it (to possibly reaffirm) or just let it go/surrender it to the CU. I have stopped payments on the credit card and LOC.

Please keep us posted on your situation. Hoping for the best for you...

PPP

[justbroke]

All you need to do before of shortly after you file, is ask the CU to remove the cross-collateralization! They will usually do this if you reaffirm the car(s). However, you must make sure they actually do this and document it in the re-affirmation agreement.

[poorpoorpoor]

Thanks for the information, justbroke. Sounds too easy... why would they release the vehicle from the cross-coll if the whole point is to protect their credit accounts? My attny asked if I wanted to reaffirm, but indicated that there will be additional costs and complications to do so since there are cross-coll issues. He's probably just trying to get more $$ out of me to do this. I haven't decided either way yet. Weighing the pros and cons...

[LadyInTheRed]

Thanks for the information, justbroke. Sounds too easy... why would they release the vehicle from the cross-coll if the whole point is to protect their credit accounts? .

Because they want you to reaffirm the loan on the car to make sure you pay it in full. It especially makes sense if you have little or no equity in the car. If the car has lots of equity, they might not agree.

My attny asked if I wanted to reaffirm, but indicated that there will be additional costs and complications to do so since there are cross-coll issues. He's probably just trying to get more $$ out of me to do this. I haven't decided either way yet. Weighing the pros and cons...

The work involved to negotiate a reaffirmation agreement is apparently not included in your basic fee. Your attorney simply wants to be paid for the work he does. There's nothing wrong with that. I'm sure he has plenty of work to do and get paid for if you decide not to reaffirm. It is his responsibility to advise you of your options.