Surprise! We're taking your car! CUs and cross-collateralization

[currerbell]

So, three months ago I contacted the credit union that held my auto loan and a credit card to find out what the cross-collateralization situation was. The credit card pre-dated the auto loan by many years, so I wasn't sure if the auto would back-date. As I only had 6 payments left on the car, I planned to reaff the auto loan. The agent I spoke with told me that there was no cross-coll in my situation and that I could go ahead and keep paying on the car. My attorney also advised me to keep paying on the car. Yes, in hindsight I was CLEARLY stupid.

Two days ago, my attorney calls me in to sign the reaff on the auto. As of this date, I only have two payments left. I get there and - surprise! - there is a reaff for both the car AND the credit card, along with a letter advising that there is a cross-coll policy that links the car to the credit card.

CU is insisting I reaff for the value of 7k. This car is almost 7 years old, has 130K on it, and has been in 3 accidents. This CU has no offices outside of its homestate, which is 1600 miles away from me. My plan is to submit a letter from a dealer stating what the actual cash value of the car is (I am guessing no more than $2500), along with an offer to pay only the remaining amount due on the auto loan (about $1000) if they waive the cross-coll provision and mail the title to my attorney to hold until payment is made (I live in a title state, not a lien state). Otherwise I am not making the remaining payments and they can waste their time and money to come and get it.

I am posting this mainly as a warning to others with CU loans. I am angry - mostly with myself. I should have known better. My attorney should have known better. If I would have known about this, I wouldn't have made the last 4 payments.

[justbroke]

Well, perhaps in defense of your attorney and yourself, no one ever knows what a Credit Union will do. They are what I call ankle biters. Irritating little financial institutions that never look at the big picture. Most of this is because they are member-owned and they do these things to "send a message" to the other members.

You should be able to argue that cross-collateralization away. If not, you now have the RIGHT mindset. You make them "eat steel" as we call it in the Bankruptcy world! Ask them how good that car is going to taste.

Your attorney may also be able to file a Motion to Determine Secured Status and fight the cross-collateralization head on.

[currerbell]

Eat steel, indeed. I just wish I would have clued in several payments ago. I am curious as to the validity of the cross-coll agreement. Interestingly, they gave us 2 reaff, the one for the credit card stated that the credit card was unsecured. If the cross-coll is valid, wouldn't the credit card be secured? The credit card agreement makes NO reference to cross-coll and states only that the debt may be secured by other deposit accounts. Auto loan cross-coll provision does not mention credit cards and just says "any debt with this institution." I don't know.

I *do* know that I am not putting any more money into the car. I am much better off tucking the money aside to buy another vehicle down the road. Does anyone know anything about repos from out-of-state institutions? What responsibilities do I have to keep the car maintained?

[justdidit]

This scares me. I have a car loan with a max of 5 payments which will probably be paid offer earlier with a CU. I had my 341 meeting this passed week and to this date neither me or my lawyer have received the reaffirmation agreement. Value is just under $8k and with such little amount left on the loan I wanna keep the car. It's a good car and I know it in and out cause I have done all my own work. I need to know whats up with the car

They have put a hold on my account and I have to get permission each time I wanna withdraw money at the same time. Was dealing with it yesterday as I was getting money out of my account. Gotta talk to some higher up lady that deals with the bankruptcies Monday to get things squared away about my account and the car.

Ugh...now I'm worried.

[scorpion35]

i also have a auto loan with a

[scorpion35]

i also have a auto loan with a CU.
MY lawyer just filed yesterday so no 341 yet.
i plan on reaffirming it.i also have a checking with them with about $1 in it
i have about 12 payments left.
no credit cards with them
what do u think they will do?

[tcreegan]

Hi all,

I am curious as to the validity of the cross-coll agreement. Apparently CUs are the master of this....

I am posting this mainly as a warning to others with CU loans. Great contribution to the forum, that is what it is all about!

Does anyone know anything about repos from out-of-state institutions? What responsibilities do I have to keep the car maintained? head over to the repo forum. If I am guessing right, for an ordinary lender a repo would be out of the question, but a CU? justbroke has it right.

Good luck w/ this mess,

Tom in Colo

[InTheDark]

Currerbell,

Cross Collateralization is Valid. In many cases if a vehicle is retained and even paid off, the Credit Union can keep the title. They can not ask you to pay on a discharged debt, such as the credit card they took a loss on, but can hold your title hostage. If the vehicle does get repossessed, as part of your bankruptcy you are not responsible for any deficiency balance, maintaining the vehicle will be your choice. It's too bad that the attorney was not familiar with this. It would have been nice to know what you were up against from the beginning. If you're interested in keeping the vehicle you might see if they'll let you retain and pay it. Even if they don't give you the title, this would give you something to drive around in until you can get another car. You can then surrender the car to them and let them figure out what to do with it.

I hope this helps and wish you the best of luck.

[currerbell]

InTheDark raises a very good point - it may very well not matter whether or not the cross-coll is valid. The CU will keep the title. Some CUs will fight over everything and will throw good money after bad to "make a point." Some are much more sensible. Mine, apparently, is not. They have made WAY more money off of me over the last 15 years than they have lost. But I need to just let it go. I am curious as to how they will take possession - would they have a local hauler take it to a local auction? Or will they drag it across the country? My experience with CUs says it will be the latter - they seem to ALWAYS need to be 100% hands on. There asset recovery agents physically go out and get the vehicles/secure and clean the foreclosed property/etc. Maybe they will be able to find that banana that my toddler dropped in the seat last month, because I sure haven't had any luck.

I have wondered, though, how these agreements work in lien theory states. To put it perhaps too simply, in title theory states, the lienholder keeps the paper title 'til the security is released and the debt is paid in full. In lien theory states, the owner/debtor retains paper title while the debt vests only as a lien without right to hold title.

[wipetheslate]

I have 2 more payments on my car, and I'm waiting to file just to ensure my CU doesn't try and do something (I owe $2K on a CC to them). Given it's a secured loan, will the payments I've been making towards my auto loan be seen as preferential?

Also, I have been making small payments on my CU credit card to avoid raising suspicion with them. The payments for the CC will not add up to more than $600 for the last 6 months. It's the only CC I have made any payments on in the last 9 months.

[InTheDark]

I have 2 vehicle loans and a credit card with my Credit Union. I was current on the vehicles and my Credit Card when we filed and behind on 2 credit cards with other companies. They didn't question it at all. I am currently paying on my cars and paying the credit card as well and we were discharged back in February. I only owe $300 on one of the car loans and want to stay in good standing with my CU. When I pay that car off I want to make sure I'm getting that title. The CU left my credit card open as long a I'm current. They also told me to wait about a year after filing BK and they can finance a home for me. I'm thinking we don't want to get into debt and probably looking to buy a double-wide mobile home. Although a Credit Union can be looked at as Justbroke stated "Ankle Biters" they can also be a way to help you to rebuild your credit. If I'm not mistaken, preferential payments are those that are well above the minimum required.

[kartoons19]

Currerbell, I am so sorry to hear about your situation. I also had a car loan and two line of credit accounts with a credit union. I was concerned about the cross-col. because it is specified in my agreement. One of the line of credit accounts was open years prior to the auto loan, the other was opened after the car loan. My attorney said it won't be a problem, but since I only had about six payments left I decided to use some of my student loan money and pay it off prior to filing. I had trouble getting the title at first and I thought it was due to the balances I had on my LOCs, but they just never mailed it out, so I picked it up.

I think most CU use a cross col. clause. So I would either try to pay it off, or move the loan to a different bank or credit union prior to filing. That is really a shame this happened, especially as you were pro-active in talking to them about it first. I hope there is some way for you to work this out. Good luck to you, I wish you the best.

[kartoons19]

If I'm not mistaken, preferential payments are those that are well above the minimum required.

I was concerned about preferential payment because my car loan payoff amount was over $600, but my attorney said that since a car loan is secured debt it doesn't count as a preferential payment. Hope this helps.

[aquavir]

Maybe I'm looking at this too simply, but when you filed your BK and the credit card was listed as an unsecured debt, and the CU didn't object to that, and you were subsequently discharged...

...Still, it probably wouldn't be worth the money to fight it, even if you may win.

[currerbell]

Thanks y'all. It just sucks because if I would have been told by my lawyer that this could happen, I would NEVER have kept paying on the car. When I first talked to the atty, I owed a little bit more than it was worth. So, yeah. As far as what aquavir writes, I totally agree. How can they agree that it is unsecured debt and then argue that it is secured? I have two payments left, the last would fall two weeks after my discharge. At that time, the credit card debt would no longer exist, and as they did not contest that that debt was unsecured, how could they then argue that the cross-coll provision is still in effect? And wouldn't they be required to release title?

The kick-in-the-crotch is that a little while ago I bought a used old granny bike to get around with my toddler. It got stolen two weeks later. Sigh. Maybe I am not meant to leave the house.