Cross colateral at credit union

[TheBajan]

I have been reading a couple of posts that have me questioning my own case.

Our mortgage is through Navy Federal Credit Union. Our LoC (being stripped) is also at the same institution. In addition, we have two credit cards from then that should be discharged at the end of our plan. I know that when we successfully complete our plan, the LoC and the credit card debt will be discharged.

My question is can Navy Federal withhold a clean title on our house or keep us from being able to sell it somewhere (years) down the road due to cross-collateralization? What I mean is, can they tell us we have to pay all of the discharged debt because it is collateralized by our first mortgage just because they were at the same institution?

I didn't want to hi-jack a thread but I'm wondering if anyone has an answer to this. Thanks for any input.

The Bajan

[justbroke]

Unfortunately, the answer to your question is maybe. If the cross-collaterialization was not removed as part of the bankruptcy (or at your request), it could get interesting. If the LoC was a HELOC (since you mention that it was "stripped") that would actually be discharged and the home no longer secured that debt (because it was "stripped"). The credit cards are the ones that may be problematic.

You should find out if the items are all still cross-collateralized with the home. Did you reaffirm the home or are you riding through?

[despritfreya]

I will have to disagree with JB. The lien strip is exactly that. If you complete the 13 you will have a recordable court order that removes the lien. No lien against collateral, no cross collateralization. All CU loans become unsecured. The discharge gets rid of the unsecured claims to the extent not paid through the plan.

Des.

[justbroke]

I have to agree with Des, but that's what I wrote. Maybe it wasn't clear, but I figured that the LoC (HELOC) was lien stripped and it is just that. I was worried about the credit cards.

There is a BKForum user that is having a similar issue right now with a credit union. It may be that the Chapter 13 has not yet discharged. I just don't put it past a credit union to make claims and cause "problems" and grief for the debtor.

[TheBajan]

JB... we did not re-affirm. We did not request to have the cross-colateralization removed. It was not something we were aware of at the time. We were told that in a ch 13 your mortgage does not get discharged so no re-affirmation was brought up. The loan being stripped was a Home Equity loan for a fixed sum that we received at one time. It was not a true Line of Credit that we tapped into like a credit card. It is being stripped without objection from the credit union and is considered unsecured in our BK as we are well under-value on our home. The two credit cards were unsecured Visa and Mastercard. We are not having any issues right now. WE are nearly half-way through our BK. My concern was whether or not the cross-collateralization could come back and bite us years from now when/if we sell or pay off the house. I'm a little unclear about what you are saying. I think you are saying that you think the credit cards will possibly be an issue. Is that right?

Des... If I understand you correctly, you are saying that it's not something to be concerned with... that the plan gets rid of the cross-colateralization from the LoC and the credit cards?

Thank you both for your input.

[LadyInTheRed]

Maybe the credit cards should have been part of the lien strip petition, assuming the credit cards are secured via a cross-collateralization provision. Did the CU file a secured claim for the credit cards?

[LadyInTheRed]

We were told that in a ch 13 your mortgage does not get discharged so no re-affirmation was brought up.

It is my understanding that a mortgage is not discharged in a 13 unless it is confirmed as unsecured debt via a lien strip.

[TheBajan]

Maybe the credit cards should have been part of the lien strip petition, assuming the credit cards are secured via a cross-collateralization provision. Did the CU file a secured claim for the credit cards?

No. They did not.

[Pandora]

We're hoping Des is correct

We're wondering along the same lines, just a different scenario; we're stripping our 2nd thats with our CU - but our car which is paid outside the plan, is also with the same CU. will be paid off in a few months.... am worried to death they wont release the damn title. We didn't request the cross-collat to be released...wasnt aware or told we had to ..??

We shall see....

[justbroke]

The problem isn't the bankruptcy code, it's the credit unions (CU) deciding that they don't like the result. A lien strip is a lien strip is a lien strip; upon discharge the lien is removed. The question that I was trying to address (in a different thread) was whether a person who crammed down a vehicle (due to cross-collateralization) had to wait until discharge in order to claim title. That's the kicker.

[TheBajan]

Pandora,
let me know how it works out for you. I have faith in Des but I also have a lot of respect for Lady and JB so I'm still a bit unsure what to expect. :/

[despritfreya]

Sorry for the delay in responding. Have family in town and am playing “tour guide”.

Des... If I understand you correctly, you are saying that it's not something to be concerned with... that the plan gets rid of the cross-collateralization from the LoC and the credit cards?

I have never had a CU come back on this issue 1) where we did a lien strip or 2) where we paid a secured claim, such as a vehicle, in the Plan and completed the 13 with $$ still owing on the “unsecured” signature loan or credit card but subject to the 13 discharge.

Des.

[justbroke]

What Des writes, is how I believe it should work. I was skeptical due to recent postings (from another forum user). (The other user was still "in plan" but had paid off a vehicle.)

[TheBajan]

thank you both again. This really puts my mind at ease.