Chapter 7 and cross collateral

[BAR]

Hey everyone,

I have a few questions about cross collateral through Credit Union, and discharging debts.

Through our CU we have an RV loan about $12,000.00 a CC owing about $4800.00 and a car loan owing about $2800.00. The car will be paid off in October, and has the most equity in it maybe about $5,000.00 in equity as of right now.

We are reaffirming the car loan, told them that we are surrendering the RV on our BK papers. (we are not going to reaffirm the RV loan but are going to keep paying on it as of right now because we want to keep the RV, lawyer told us this will work most of the time and the CU wont reposess the trailer) I talked to the CU and they asked me to reaffirm the trailer and the CC after the BK is discharged. I told them if they keep my CC open and dont close the account that I would probably do that to keep in good graces with them to use the CC to rebuild my credit rating in the future. The CS rep told me he would talk to the CU people responsible for making that decision and he felt that he could get them to keep the CC account open. (Do you think he is BSing me on this?)

We do have the cross collateral clause in all of our loan papers for the car and RV.

I would love it to just discharge the CC and be able to keep the RV and the car, if the wont keep the CC account open.

Can this be done without the CU saying, "ok you defaulted on the CC so we are using the cross collateral clause, and now we are going to repossess both the car and RV after your BK is discharged."

I guess Im asking has anyone had experience with this and the CU let the CC discharge but let the member keep the car and an RV loan?

My lawyer says that we are in the cross collateral trap that most fall into with CU's but dont know it has happened. He did seem to have any answers to my questions about this.

Thanks in advance

[BAR]

Anybody,

Even maybe just some advice on the above post? I have read a bunch of posts here but now am even more confused on what to do?

[Pandora]

Hi Bar

As to keeping the RV w/out reaffirming, I think that's probably dead in the water. You're filing CH. 7 and an RV is considered a luxury item - your trustee will more than likely not allow it.

Here is a great source for more info on CU and cross collateralization clauses http://www.moranlaw.net/cross_collateralization.htm

[BAR]

Thanks for your response Pandora!
I dont understand, on the papers filed, we said we were going to surrender the RV. The lawyer told us that is the way to do it because then if we just keep making payments on the RV then the credit union wont take it. He never mentioned that the trustee will not allow it. He said people do this all the time in Michigan with items that they want to keep.

Does the trustee step in and make you surrender items listed as surrender on your paperwork before discharge? I guess how does he know whether we have surrendered it or not. Im confused.

[Pandora]

Normally on a vehicle that you do not want to reaffirm, yes it works that way, and you generally can continue to pay for it until its 1. paid off & you get the title, or 2. you decide you no longer want it, so you turn it back in. With a luxury item like an RV or boat, it generally doesnt work that way because they are not necessities and the money you're wanting to pay monthly could be used towards paying creditors (possible Ch. 13).

I dont know if MI allows you to keep luxury items/vehicles in a Ch. 7 case, but here in VA unless you own it outright and can exempt it or file Ch. 13 (Ch. 7 liquidation applies), its the only way to keep it. We went through this with our RV, however we owned it outright, therefore in order to keep it we had to pay its equivalent into our Ch. 13.

ETA: the other issue is that there are cross collateralization clauses on every thing you have with the CU.

[BAR]

Ok I understand that it is different with an RV and a car. We didnt list it as an exemption, because you are correct, MI doesnt allow a luxury item to be exempted in a chapter 7.

So does the trustee take control of the surrendered RV? Or is it just a matter of us returning it to the credit union ourselves. And then does the credit union notify the trustee that it was surrendered?

I dont know how all this works and thanks for your help.

[Pandora]

Generally you can either tell the credit union to come and get it - or you can arrange a time/day to drop it off to them.

This is something you need to ask your attorney how to proceed. I am going to PM you a link re: MI BK and how it all works since I'm not sure if I can post it on the forum or not. It breaks everything down simply in laymens terms, something we all need that aren't lawyers

Gimme a sec..

ETA: Ok, sent it to you. While 2 of the 3 links are all over the forum for reference, 1 isnt and I didnt want to post it w/out knowing if it was okay to do so. If you read through the BK forum you will find copious amounts of information, as well as there are some great members that are from MI that should be able to assit you in what is usually the process for your district.

[BAR]

Ok excelent! Thanks a bunch for your help !

[BAR]

Yep I got the PM thanks!

I have been searching the forum for 2 days now and asked a few questions and the help has been fantastic!!

But now that I searched the forums I think Im even more confused about this situation with the RV.

I will have to ask my lawyer how the RV will be handled by the trustee in my case as I do want to keep it. Like I said he said just say on the forms surrender and then just keep making the payments and it will be fine. The way it seemed to me when talking with the lawyer was that the trustee would not be involved with the surrendering of the RV. And to just make the payments on it and we would be able to keep it that way. I dont kow thats why I asked here figuring maybe like you mentioned someone from MI had a similar situation.

Maybe I should post the question differently on the forum and go from there.