Cross Collaterization GOTCHAs!

[Bit_Image]

I stopped paying CC's for 2 months now. I am filling Chapter 7 after finding a good lawyer who is also a trustee. However, after doing some digging, I came across this term 'Cross Collaterization' and I am affraid that my Bank may use it against me. Nothing has happened yet, but I have been doing research on what they could do when I file. From what I have found, credit unions are usually worse than banks in using Cross Collaterization, but I am nervious never the less.

I have a car loan which I want to reaffirm, I have a bank account and a credit card all with this same bank. To make matters worse, I am employed by this bank as an IT professional. Anyway, I read that some people have had their car repossed when they are late on their credit card bills. Or worse yet, others have signed a reaffirmation agreements only to find that then the debt is paid, that the bank will not release the title because of the debt that is owed on the credit card. Is this true or am I in alarmist mode again over this BK stuff. I have been hovering in this forum for nearly a year and I have not seen this question posed. Please help!

[FreshLikeADaisy]

Bit, I think you need to pull out your contracts and credit agreements with this bank, as well as your employee handbook, and find out exactly what they say. It'll make your head explode but you should be able to find some indication as to whether your job will be impacted by this.

But the real GOTCHA that I don't think you've yet recognized is going to be in the reaff agreement for your vehicle. If they word it right, you could be reaffirming your ENTIRE debt with this bank, not just the car loan, and a reaffirmation will survive the bk. You may even want to consider finding another ride -- either cheap cash only, or a loan through a different bank -- just to avoid having to sign any reaff.

In the end, if your job rides on this, you may be better off with a 13 than a 7 because they have to actively agree to a 13. But in the meantime, I cannot tell you emphatically enough, open new accounts at a completely unaffiliated bank and change your direct deposit to the new accts, like, YESTERDAY. Close the actual checking account if you can; if you cannot then leave $5 in it. But do not have your income at this same bank when you start defaulting payments to them: if they yank it out of your checking, then what about the rent check you just wrote, or your utility payment, or child support, or... You get the picture. So change banks ASAP, and don't make any other financial move until your direct deposit is entirely switched over.

There's a small chance they may try to hassle you -- banks that employ you LOVE to have your business there, and not all for good reasons -- but you have the right to direct your paycheck to whatever bank you like. If it comes down to it, make them cut you a paper check; they'll change your direct deposit fast enough.

If you do this one thing, it will minimize your pain regardless of what their cross-collateralization clauses are. And rethink that reaff, if you can: you might be signing up for everything you wanted to get rid of to begin with!

Good luck to you!!!

[Bit_Image]

I already have another bank, as I knew that I could have $ taken from it. However, the title thing scares me. Has anyone else experianced anything like this before?

[JRScott]

Does your employer require direct deposit into an account at their bank. If so they possibly could seize future monies to pay the debts .

You probably need to take this to a lawyer in your area and ask them about it.

[Bit_Image]

You mean that my bank could require that they only deposit my paycheck at only their bank? This does not make sense to me, nor have I ever heard that. Obviously, I need to find out ASAP! Thank you.

[FreshLikeADaisy]

Bit, this was many years ago -- possibly 1997? -- when I was doing some work at what was then First Union, and they were going around trying to get every employee to have their paychecks direct deposited into a First Union account. A friend of mine who worked there aat the same time happened to be dead set in his ways, had banked at the same bank for some 20 years, had no intention of changing, and you should have seen the repeated "encouragement" he got from all manner of visitors to his desk to change his evil ways and return to the fold by opening an acct at FU. I, of course, being the corporate subversive that I am, told him to stay strong, and he did, and basically he wore them all out over time; they quit trying. That he was the stubbornest SOB I had ever met didn't hurt any, either.

Back then, as well as now, a bank could direct deposit to any other US bank (EFT was alive and well, though "Worst Union" is no more ) but at the time, First Union either direct deposited your First UNion paycheck into a First Union account or you got a paper check... and they did NOT want you to get a paper check. If you think about it, your employer having full access to all your financial information 24/7 isn't the best scenario for you, it shifts the balance of power even further away from the employee. Which is why they were really working hard toward 100% participation in this scheme. They didn't get it, but came close... and it wasn't much later that they had that sudden (no notice! same day you knew, you were out) mass layoff of what? 5000? 6000? employees in Charlotte. Who had all had their paychecks being direct deposited into their First Union accounts like good worker bees. Tell me that didn't make FU's life easier. You tend to leave more quietly when they've got all your banking accts.

In another story, a good friend of mine did a management stint at SunTrust here in Florida. Stayed for a year, decided he didn't like it, started looking. During that time, he saw a recently quit employee's bank account debited without notice or warning for some $300 after she left, purportedly for a parking lot pass she had failed to return. My friend thought there was more to it than a missing parking pass, had seen something similar every time ANYONE left, and took the hint. He slowly began draining his accounts and then getting his checking, savings, whatever into other banks, all the time singing the company song with a smile. They didn't want him to change them, but he insisted he had to and made up some story, and they bought it and made the changes as he had requested. Again, during this same time, there was another employee who left, and was debited for some $500 without notice or warning, not a parking pass but something similar, and my friend just bided his time. Left a month later and there wasn't a thing they could do.

I haven't heard more recently of that specific paycheck scenario happening again, but I have often heard of (and received) offers from employers (banks) of too-good-to-be-true employee deals, like change your checking and saving to this bank and we'll give you a %2 car loan, things like that. Way better than the free toaster.