Looking for some input

[grizindabox]

We are getting close to filing but one dilemma is our vehicle. We only owe $2800, but it is to a credit union that in their web of paperwork also associated the vehicle as collateral to an overdraft and credit card account. The total amount of the debt to this credit union is around $6000. One option we are considering is attempting to refinance with a cosigner the entire amount, in essence paying off the credit card and overdraft since the vehicle is worth more than what we owe. This way we lower our payment to carry forward. I should also add that the credit union has gotten wind that we may file for BK. If we do this, how would the trustee etc. treat it and what effect would it have on the co signer outside of responsibility for the vehicle loan.

[scorpion35]

We are getting close to filing but one dilemma is our vehicle. We only owe $2800, but it is to a credit union that in their web of paperwork also associated the vehicle as collateral to an overdraft and credit card account. The total amount of the debt to this credit union is around $6000. One option we are considering is attempting to refinance with a cosigner the entire amount, in essence paying off the credit card and overdraft since the vehicle is worth more than what we owe. This way we lower our payment to carry forward. I should also add that the credit union has gotten wind that we may file for BK. If we do this, how would the trustee etc. treat it and what effect would it have on the co signer outside of responsibility for the vehicle loan.

i think the co signer's credit will take a hit

[grizindabox]

But would the co signer only take a hit if we actually default on the loan?

[tcreegan]

Hi grizindabox,

Credit Unions are good at this 'cross collateral' business. The problem w/ refinancing and paying off the credit union is that the trustee will see the non-car part as a 'preferential' payment to a creditor. They will want to pull this money back to be distributed evenly among all your creditors. Not sure how it would play out, but it might get messy....

You can get rid of the problem in a Ch 13, but filing Ch 13 just for a car in probably not a great idea.

There is an outfit called '722 Redemption' that specializes in financing cars in a BK, you 'redeem' the car by paying fair market value to the BK trustee, getting the $$ as a loan from 722-R

Of course the $$ can come from any source (at least that doesn't involve a ski mask and a firearm... )

Are you filing w/ and attorney or pro-se? This would be a good issue to talk about with a BK attorney...

Good luck w/ this,

Tom in Colo

ps: how much equity are we talking about here?

[bk2009]

Is there much equity in the car? Can you just let the car go? Buy a cheaper vehicle in cash?

[debee]

We are getting close to filing but one dilemma is our vehicle. We only owe $2800, but it is to a credit union that in their web of paperwork also associated the vehicle as collateral to an overdraft and credit card account. The total amount of the debt to this credit union is around $6000. One option we are considering is attempting to refinance with a cosigner the entire amount, in essence paying off the credit card and overdraft since the vehicle is worth more than what we owe. .

Could you refi just the car loan portion with a new lender/cosigner? Then so long as you can exempt the equity in the car, you are free to walk on the cc debt and overdraft.

Would your cosigner go on loan without going on title? Because a title transfer (even 1/2 share) is not a good idea just prior to filing bk. If the equity is totally exempt, it might not matter that you add someone to title. Not sure.

Also, I think if you were to do a cash-out refi you would change your income in the 6 month lookback which would impact your means test. Not sure. (eta: Some forum members have posted that yard sale proceeds can be counted as "income". I thought it had to be "regular" and sold at a profit to count as "income" but I don't know for sure either way. Hopefully someone who knows will comment.)

Also, the payments to the CU credit card and overdraft debts would be preferential.

[tcreegan]

Hey debee! ...gotta be careful on credit unions, they write up the cross collateral so the credit lines become secured by the car as well as the car loan.

“The collateral securing this loan shall also secure any and all other loans and accounts with the credit union.”

I liked 'Hub referring to credit unions as the 'ankle biters' of the financial world....

Tom in Colo

[debee]

“The collateral securing this loan shall also secure any and all other loans and accounts with the credit union.”

Exactly. That's why I suggested they refi the car loan elsewhere, pay off the CU car loan and walk on the rest. Once the car loan is paid off, it's not "collateral" anymore. Or am I just dumb as bricks today and missing something here?

[tcreegan]

by no means dumb as bricks!!! To pay off the car, you have to pay off the car loan + the credit lines. The CU has a lien for the car loan + credit card + overdraft + anything else...."all accounts"

...and they are sneaky about this, it is buried in 18 pages of fine print and they aren't exactly upfront about it when you apply.

[debee]

How long can a credit union keep a lien on the car though? If the OP can pay it off, don't they get clean title? We've financed cars through credit unions and then sold them before the debt was paid off, no problem. If the OP can slip the car out, how can the CU keep a lien on it into the future? Is the OP prevented from selling it until all the other debts are paid off? This doesn't sound right to me.

I understand that if they default on their credit cards, the CU can repo the car even though the car payments are current. But if the OP can pay off the car, or sell the car, how can the CU's lien follow it?

(This whole post is an edit of an edit of an edit.)

[debee]

Bump because of a series of edits. Would like persons with insight on this issue to splain me.

Am I to understand that the only way for the OP to preserve their equity in this car (aside from paying back all their CU debt) would be to sell it and buy another car?

[debee]

Just in case anyone with CU issues wanders onto this thread. Thought I'd share this little nugget of hope:

http://www.bkforum.com/showthread.ph...722-Redemption

If you scroll until you see the person with 08 at the end of their name, you'll find someone who got their CU to drop the cross collateralization during a reaffirmation. They got to keep their car but not the other debt.

[brokejoker]

Just in case anyone with CU issues wanders onto this thread. Thought I'd share this little nugget of hope:

http://www.bkforum.com/showthread.ph...722-Redemption

If you scroll until you see the person with 08 at the end of their name, you'll find someone who got their CU to drop the cross collateralization during a reaffirmation. They got to keep their car but not the other debt.

We had credit cards, an overdraft line, and a car with our credit union. We agreed to reaffirm the car loan ONLY. The CU made all kinds of noise before we filed but when they got the BK notice we had no problems discharging the CCs and the overdraft line and keeping the car.

[debee]

This is a post from Startingover08 (Forum "Mentor" from Sept/09). Will add link at bottom, but for some reason I'm having link trouble when it comes to old forum threads. Not sure why. Anyway, I thought this approach was hopeful info re: the horror of cross-collateral.

"OP, I was not current with my CU credit card when I filed BK, but I was current with the car payment. I selected 'intent to reaffirm' with the car. The first reaffirmation agreement that came from the CU (automatically, before I spoke to them) had a larger balance than what was actually owed on the car.

I called to find out what what going on - that is when I discovered they were trying to move some of the balance from the cc to the auto loan. Naturally, I did not agree. So after some discussion we came up with a mutually beneficial plan. They would reaffirm the auto loan, drop the interest rate a little, stretch out the payment for another two months, take off the additional balance they added from the credit card, drop the cross collateralization, and allow me to skip the current month (that was during my automatic stay). I also had them add a clause specifically about them sending me the title immediately upon payoff.

When we agreed, the CU put the new reaffirmation in writing, sent it to my attorney, and I signed off. They signed off, the attorney signed it, and it was filed with the court. I was prepared to surrender the vehicle the entire time. In fact, on my other car I ended up surrendering because that lender (Independent Bank) was totally uncooperative. You have to do what is best for you and your long term plan.

I did not have as much equity as you have though. Are you sure you have that amount of equity? I checked my value against the Black Book value to make sure I did not over value the vehicle (we have to use NADA Retail in our district to file, which waaayyy over actual value). But when you are negotiating, the BK dept realizes that actual value is less than KBB or NADA show. They can not repossess during the automatic stay without first getting a Relief From Stay from the court.

Don't let them tell you that you have to reaffirm both. DO NOT REAFFIRM CREDIT CARD DEBT. If the CU tries to make you do it, it is better to surrender the car."

http://www.bkforum.com/showthread.ph...it-Union-Oh-No!!!

[tcreegan]

Hi debee!

If the OP can slip the car out ...always worth a try! If it works do the happy dance..

Is the OP prevented from selling it until all the other debts are paid off? ...nope, but a nasty CU will not release the title until all debts is paid

This doesn't sound right to me. ...you're darn right it isn't right! Especially when it is buried in the fine print and not discussed when the loan is signed.

Fortunately not all credit unions are the nasty variety, positive posts seem to be cropping up more and more....