Moral vs financial wellbeing

[wbrguy]

So, I will meet my lawyer today at lunch in order to pay the first of three payments in order to get my Chapter 7 started. Here is a big issue that has been causing me to lose sleep and really stressing me out: I have an auto and signature loan at a credit union. About 9 years ago I was an employee at this credit union. A little over a year ago I refinanced my car with them and a couple months after that I applied for an unsecured credit card consolidation loan. Although the refi. for the car went easy; when it came to getting the CC consolidation loan, I was initially turned down. So, I talked to a former coworker and he vouched for me. I certainly wouldn't have gotten the loan without his recommendation. Now, I have to decide if I'm going to pay back the unsecured loan. If I continue to make payments on it, then I will keep my good relationship with my credit union, but if I don't then not only will I ruin my relationship with the credit union, I feel like I will have personally put him in bad spot. After all, he is the one who said that I was "good for it". Of course, he has no legal responsibility for my not paying the loan, but it's caused me a lot of stress. I certainly could use the extra $360 a month for the upcoming baby and other things. I will continue to pay for the auto loan regardless. I'm just looking for other's opinions. Thank you.

[justbroke]

As you know, Credit Unions (CU) are member organizations. They typically don't take kindly to bankruptcy at all... unless you reaffirm all the debt. As you also probably know, your vehicle also served as collateral for your signature loan. This cross-collateralization of the loan is the true issue here. You may need to get the CU to remove the cross-collateralization and then you could discharge the personal loan while reaffirming the vehicle loan.

As you wrote, you could choose to reaffirm all the debt (vehicle and personal loans) and be in the good graces of the CU. That is a personal decision that I can't even begin to address.

[Geeznowwhat]

I cannot figure out what it might even mean to "be in the good graces" of the credit union.

From my own experience....I did not default on any loan with the CU. I did not cause them to lose a darn thing.
I have been treated like the biggest deadbeat here is by them. Even totally unrelated services (like bill payer within the CU itself) have been denied me.

They let me keep a checking account.... This I could get in many other places minus the attitude and hassle.

Keeping a debt that leaves you strapped for money just to "be in their good graces" is a poor decision in my opinion

[wbrguy]

Of course I won't inform the credit union of my intentions to file bankruptcy, but as soon as my lawyer "pushes the button", they will be the first creditor that I call. Today they informed me that I will probably be able to put a couple payments on the back end of the loans. That will give me enough funds in order to file next month---and get this process behind me. More than likely I will reaffirm my debts with them. They have treated me very, very well and I'll be able to sleep a little better at night. Of course, it will help to rebuild my credit later too. I am sorry that your credit union treated you unkindly. I certainly hope that mine will continue to treat me as well as they have in the past. Hopefully I'll be able to get a secured credit card through them after this process. Thanks for the comments--I do appreciate your input very much.

[bcohen]

You do realize that you can keep paying your loans, even if you do not reaffirm them. You can inform your credit union of the fact that you plan to repay the debt, even if you don't sign a legally binding reaffirmation agreement. If for some reason, something comes up--such as a job loss, extended medical problems, etc.-- and money gets tight then you will be glad you didn't reaffirm anything.

[wbrguy]

Yes, I have read a lot on bankruptcy, specifically Chapter 7--including credit unions, so I understand the reaffirmation process. According to my lawyer, my credit union will almost certainly REQUIRE me to reaffirm both the auto and signature loan in order to keep the car even though there is no equity in it. The question that I keep going back and forth on, even though I thought that I really had decided was this:
I can reaffirm both loans and hope to get better terms on the signature loan (hopefully reduced monthly payments)--this will most certainly help my credit to rebuild faster (2 years left to pay) and I will feel a lot less guilt OR I can find another financial institution for my direct deposits, give up my car (only 60k miles), feel horribly guilty bc I used to be an employee there and they've been very good to me, clear $700 more each month by not having to pay those two debts, have to find another car--probably with very high interest rates and I know it won't be paid off in two years for sure. I'm still very much LEANING towards keeping my relationship with the credit union, but that extra $700 per month sure would help out a lot---choices! Thanks again everyone.

[LadyInTheRed]

Take bcohen's advice. If you do not reaffirm and keep paying, they are unlikely to reposses the car. If you do reaffirm in the hopes of getting better loan terms, keeping your relationship with the credit you and rebuilding your credit, make sure all of those things are part of the reaffirmation agreement, including maintaining access to all CU services.

$700 a month is a lot to pay each month out of guilt. Unless you know for sure that it will harm the person who vouched for you, I wouldn't even consider it. How's your credit right now? You might want to cosider financing a replacement vehicle before you file BK.

[wbrguy]

That's the catch 22 that I am in. I have a okay credit score of 655 now, with no negatives on my report, so now I can go out an get a decent car for the family. I would like to give the credit union a chance to offer me a deal to reaffirm just the car or just let me keep it while staying current------, but if they don't and I have to surrender the car---well, then I will have a BK on my record and my rates would go through the roof AND I would have to have a down payment. So, I have actually started looking for good mid-sized SUVs that would accomodate the family and last a few years while my credit rebounds. Thanks to everyone for your valuable input.