Negotiate Settlement on SigLoan & Visa that are Cross Collaterlized with car loan

[doni49]

I have a car loan with a CU. I also have a Signature Loan and a Visa with them as well.

The car loan is current but the SL & Visa are about 6 months behind. They sent me an email message stating that they'd like to make a settlement offer. I called them to see what kind of settlement offer they wanted to make--I got her VM so I don't know any terms/amounts yet. But I do have a few concerns.

The car loan balance is 21k, SL balance is 800 and Visa balance is 10k.

The SL & Visa are cross-collateralized to the car loan otherwise, I'd tell them to pound sand because I'm still unemployed.

My intention all along (since deciding that I'm going to have to go bk) has been to redeem the car loan because the car's value is only 16k. I want to keep it because I bought it new and know it's been well cared for. Who knows what I'd be getting if I were to go buy a used car.

1) If the settlement offer is low enough that I could actually afford to pay it in one lump sum (which I doubt), how would that be seen if/when I do file bk? The SL & Visa are both supposedly unsecured. But then the paperwork has the cross-collateralization clause and the car loan paperwork indicates that it secures "any other debt [I] have with [them]". So would a trustee see it as preferential treatment for an unsecured creditor? Or as me paying on a secured debt?

2) If the settlement offer is too high for a lump sum and they agree to roll it into the car loan (which I'm sure is the only way they'd accept a payment plan) would that later prevent me from redeeming the car if I should still want to do so? The reason I mention this second option is that when I first told them that I had lost my job and might have trouble making my payments, they wanted to roll the SL, Visa and car loan into one new car loan. I said no because at the time, I didn't understand about this cross-collateralization clause and didn't want to convert unsecured debt into secured debt.

TIA!

[newbie2]

Doni, you say the car is worth $16,000 and you owe $21,000 on it. If the credit union wants to roll your signature loan and your Visa in to one loan the balance will be outrageous compared to the value of the vehicle. I am pretty sure that that for bk purposes the signature loan and Visa would be considered unsecure (perhaps others will know for sure) so I would also be concerned as you are about a preferential payment to them.

Please re-think reaffirming the car loan and/or doing anything about the other 2 loans until you've talked with an attorney, especially since the loan to value on the car is out of whack as it is.

[doni49]

Please re-think reaffirming the car loan and/or doing anything about the other 2 loans until you've talked with an attorney, especially since the loan to value on the car is out of whack as it is.

I have no intention of reaffirming the car loan. I have yet to get any details from the CU. I'm just trying to look ahead and imagine what they MIGHT offer and attempt to prep for it. I called a local attorney today to ask about this. She was out of the office today--I'm hoping to hear from her tomorrow.

I want/need to keep them from taking the car before I am able to file. I had thought this settlement would help with that. I'm assuming the settlement amount won't be low enough and will require a pmt plan. I'm also assuming the only way they'd consider that is if it's rolled in to the car loan. But my concern with that is will that prevent me from doing the 722 redemption when I'm ready to file?

Thanks!

[tcreegan]

Hi doni49,

The car loan balance is 21k ...prevent me from redeeming the car

You got 21K to redeem the car? on unemployment??? Can I be your friend?

With the cross-collateral, the actual redemption price is car loan balance + SL balance + Visa balance

...and the CU might require a reaffirmation...who knows what they will do, I chuckled when 'Hub called them the 'ankle-biters of the financial world'

Tom in Colo

[doni49]

Hi doni49,

You got 21K to redeem the car? on unemployment??? Can I be your friend?

Oh how I wish! No that's why I haven't filed yet. I need to get a new job so I can qualify for a redemption loan. It's an expensive rate, but since I expect to cut thousands off the balance, that will more than offset the increased finance charges. Plus I've spoken with a local bank about my situation and was told that because of my history before the job loss, she's confident that with 6 months of on time payment history on 2-4 accounts she'll be able to refinance the redemption loan down to a normal interest rate. Of course, I won't be extending the length of the payments just lowering the rate and the payment amount.

With the cross-collateral, the actual redemption price is car loan balance + SL balance + Visa balance

I'm not sure what you're saying here. Redemption should allow me to pay the CU the 16k (or whatever the final value is accepted at) and the rest would be discharged.

I chuckled when 'Hub called them the 'ankle-biters of the financial world'

That's funny.

[ccsjoe]

doni49,

On those redemption loans, unless your original interest rate is high, you will probably not come out ahead. I looked into one. I have a loan at 28K, car worth 21K (loan includes 3K of maintenance plan prepaid through 75K miles) at 5.9%. Looked into 722 redemption loan, they said car value for loan purposes would be 19K, interest rate 24.9....monthly payment actually increased. Just do the math prior, make sure it works for you.

[tcreegan]

Hi doni,

A CU usually has cross-collateral clauses that allows them to offset the secured debt with the unsecured debt. If they are like most CUs they are going to want the the vehicle loan + the unsecured debt.

qualify for a redemption loan. It's an expensive rate, but since I expect to cut thousands off the balance, that will more than offset the increased finance charges. ...this is an episode of "Lets Make A Bad Deal!!" As cssjoe said, do the math (your math, not the banks math) and examine carefully b4 going into this...you will be taking on a big chunk of debt post-BK without a secure financial horizon ahead...

...for a heads up, ask the bank to put the 'after 6 months on time payments we lower the interest' in writing and see what happens.

Tread carefully,

Tom in Colo

[doni49]

Hi doni,

A CU usually has cross-collateral clauses that allows them to offset the secured debt with the unsecured debt. If they are like most CUs they are going to want the the vehicle loan + the unsecured debt.

I understood that's what they wanted.

qualify for a redemption loan. It's an expensive rate, but since I expect to cut thousands off the balance, that will more than offset the increased finance charges. ...this is an episode of "Lets Make A Bad Deal!!" As cssjoe said, do the math (your math, not the banks math) and examine carefully b4 going into this...you will be taking on a big chunk of debt post-BK without a secure financial horizon ahead...

...for a heads up, ask the bank to put the 'after 6 months on time payments we lower the interest' in writing and see what happens.

Tread carefully,

Yes. I've already done the math. And for the purposes of making this decision, I'm not even counting on the refi down the road. The redemption loan in and of itself would lower my monthly payment by about 400. Of course that calculation includes having to make the car loan, SigLoan and Visa payments as opposed to just making the redemption loan payment. And considering the balances of all the CU debts combined, the redemption loan would reduce the principle balance from 31,800 to around 16,000. Just to be sure I had enough wiggle room, I worked out the math for having to pay as much as 18k on the redemption.

If it were just the car loan by itself, the redemption would not make sense.

The eventual refi is just "icing on the cake".

The only reason I posted this thread is that I didn't want to make it so that I no longer had the option of doing the redemption. But that's all moot now. I got the settlement number from the CU today. They want way too much to even consider and insist that it be done in a lump sum. NOT Hap'nin.