Cross-collateralization

[Lee123]

Today I got a call from one of my debtors saying that the they were going to repo a truck that is in my name because when I applied for a visa card that I have defaulted on the truck was used as collateral. The truck is still in my name, but when I went through a divorce it was awarded to my ex. He has been keeping up the payments, but now they are going to take it unless someone comes up with $254.

I told my ex that I would pay the $254 to buy him some time for me to file and work everything out, but he would have to pay me back(I was going to surrender it, he was going to take over the payments). At first he agreed, but then he texted me back a slew of profanity and basically said he would rather have the truck taken then to pay me back. He then went into what a f'k up I am, ruined his life, etc etc.

I am quite torn. A part of me wants to go ahead and pay the amount just to keep the semi-peace that we have between us (we have a son together, so we have to be on decent terms with each other). He does have a motorcycle and another truck, but the second vehicle is not reliable.

My boyfriend and mother, however, tell me not to pay a dime and to let the truck be taken. My bf said I was being reasonable and the ex reacted in a hostile manner. My mother says to not discuss anything with ex unless it has to do with my son.

I know if I pay it he will NOT pay me back. He has made that quite clear. But a part of me is still concerned that he has reliable transportation (mostly because of our son and heavy guilt that he lays on me). Should I pay the amount and let it go? Or should I take everyone's advice and let them take the truck?

I am officially filing on Friday, but the creditor said that will not be soon enough to hold off the repo (they need a case number, or something).

Your advice is appreciated.

[blessed]

If he's got another set of wheels I wouldn't bother paying. There's a good chance it's just a scare tactic anyway, call their bluff. Taking a truck for a $254 debt seems over the top, and not being able to hold off a repo for 4 days seems more than fishy.

[StartingOver08]

Since you are surrendering the truck in your BK, then don't make the payment.

You are filing BK for a reason. Use this time to work out the budget that you will be living on post BK.

It is a shame your ex has to resort to profanity in the situation. Try to keep the relationship civil because of your son, but do not pay anything now that you are filing friday. You do not want to complicate your BK.

[Lee123]

Well, the cc debt is probably about $10,000. I actually own about $750 in overdues. When they realized I was filing bankruptcy they went back and said if I paid the lowest amount that I missed (which is $254) they would hold off on the repo. How long does it usually take before they go through with the repossession? The lady that I spoke with made it sound that by next week they would be demanding the truck back.

Edit: Thank you, StartingOver. My ex tends to lay the guilt on very thick, and sometimes I buckle because of it and give in to his whims. I don't know whether he does this on purpose or not. When I file how quickly will I get a case number? That was what the creditors were really wanting. =/

[StartingOver08]

If the truck is really in danger of being repo'ed because of non-payment of a cc debt, then payment of the $254 won't delay it at all. You would be just throwing away $$$ AND it would be a preferential payment in the BK.

Remember, CA's and OC's will say anything to get money out of your pocket into their pocket!

[Lee123]

OK, thank you. I am really scared. I just want to file on Fri and move on. Me filing bk will completely sever the last of my financial ties with the ex. I am concerned that there will be a hold up because he never registered a boat we have in both of our names so there is no title.

I do not know how these companies work. This situation is all new to me, and I have no idea what a preferential payment is.

Thank you again.

[StartingOver08]

A preferential payment is when you pay one creditor over another creditor. If you had 6 creditors and only paid one, for example, then you are giving that one creditor preferential treatment. It normally only becomes a factor within 90 days of your BK filing date and if the total amount exceeds $600. If you do make a payment or a couple of payments to unsecured creditors prior to your filing, then the BK trustee can choose to go after the creditor to have those payments paid into the BK estate. The BK estate is created the day you file.

It can make a simple no asset Ch 7 into an asset Ch 7. Not that that is a terrible thing, but it is something you should be aware of when you file. This is why the petition specifically asks who you made payments to cumulating to more than $600 within last 90 days of your filing date.

[SMinGA]

Preferential payment is not an issue for secured debt, and it does not create a problem for you. It becomes an issue between the trustee and that creditor. The term gets tossed around a lot, but its not something to be afraid of when it comes to actual creditors. Were you giving money to family/friends it would be a bigger issue because the trustee could demand they pay it to the trustee. And no one really wants the trustee hounding their family/friends for money.

If they are going to repo the truck over past due payments, then I agree that a payment of $254 may not stop the process. If they have not taken it by the time you file, the automatic stay is in place and they can't touch it til discharge OR they get relief from the stay. If they have not gotten the truck by the time you file, let your attorney know you need the case # as soon as the case is filed. Call the CU and inform them at that point.

Good luck dealing with the Ex. I can't imagine how tough it must be. But someone else made a good point - the truck is going to be lost at some point during the process, so your ex might as well work on getting a reliable vehicle some time in the very near future. If the CU has cross collateralized the card & truck loan, then your ch. 7 will not change that. You'll be discharged from the debt but the CU will still have the title. They can refuse to release the title unless the credit card gets paid in full.

[Lee123]

Were you giving money to family/friends it would be a bigger issue because the trustee could demand they pay it to the trustee. And no one really wants the trustee hounding their family/friends for money.

Oh wait... In Feb. I gave my mom $3300 that I got from a Pell Grant. It is my rent money for the next 6 months, and I gave it to her so she could hold onto it, because I really did not want to dip into it. I also gave my ex $1200 for CS (also from the Pell Grant). Will that become an issue?

[SMinGA]

By CS do you mean child support? My best guess is that would be a non-issue, its not treated the same as unsecured debt.

For the rent, if you can document that its rent for 6 months, that would help. Otherwise - it may be a problem. Best to discuss with your attorney on that one!

[Lee123]

Yes, the CS is Child Support... and the only documentation that I have are rent checks my mom has been sending me every month. Would that be sufficient? I will be calling the attorney today, this is very concerning for me.

[BCA2009]

To avoid the truck from being repo'd before you file, just park it somewhere they can't find it for four days, then the automatic stay kicks in. If you don't have a friend who would let you park it at their house, park it at the airport or in the parking lot at motel (Days Inn etc). They have cars parked there for several days at time, so it shouldn't raise any eyebrows.

Don't put it at a relative's unless it is in a closed garage. They might check those places.

But I actually think it is just a scare tactic, collections people will tell you anything just to get a small payment out of you. They will also tell you it needs to be made over the phone right then. DO NOT GIVE THEM YOU BANK INFO!

Good Luck!

[BCA2009]

Yes, the CS is Child Support... and the only documentation that I have are rent checks my mom has been sending me every month. Would that be sufficient? I will be calling the attorney today, this is very concerning for me.

Get the money back from your mom and pay the next 6 months directly to your landlord. I'm sure they will accept payments for future months.

[Lee123]

Just got off the phone with the paralegal. I hope she is right. I am meeting with her on Friday, and I will have more to ask.

My BK should be very swift and easy from what people have told me. I have no mortgage, no assets except the vehicles that the ex was suppose to take my name out of (I have decided to wash my hands of that... I offered to help and he cursed me), all I have is a lot of credit card debt.

The paralegal said the money that was given to my mom would be counted as cash on hand, as long as she is not benefiting from it it is not considered a preferential transfer. The money for the CS is also exempt, and she said not having the boat title is fine.

SIGH. I believe I have everything in order so far, I am going this afternoon to pick up my credit certificate and tomorrow I will call about my paycheck for the last 6 months. Life insurance policy is supposed to be faxed directly to the law office.

I am grateful for how relatively uncomplicated my situation is. When I read through everyone else's posts and people are talking about multiple homes, businesses, medical bills, etc. I am relieved for myself, but feel very bad for them. This has been such a nightmare for me, I can't imagine how bad it must be for people with a ton of assets.

Everyone tells me filing BK is a new beginning. I just can't see that yet.