Cross Collateralization at credit Union

[eap82]

Hi all,

I bank at grow financial in Tampa. Does anyone have any experience with having a credit card and car at this bank and filing. I'll be including my credit card but not my car in my bankruptcy. Car payment is still up to date, I have no equity in it either. Wondering what I can do about this situation, I really don't want to loose my car. It's a Honda Civic, nothing flashy but relatively new and I don't want to worry about a car that will need to be replaced soon. Thanks!

[shipo]

Are you filing for a Chapter 7 or a Chapter 13?

[eap82]

I’m not sure yet. I’m right on the cusp of median income and waiting 90 more days.

[justbroke]

If you're filing Chapter 7, and you have no vehicle repossessions on your credit report and have otherwise "fair" credit, I would redeem the vehicle. A 722 Redemption, as it is called, allows you to purchase the vehicle from the creditor for current market value (determined at the hearing on the motion to redeem). You would need to secure financing from a third party. The redemption loans typically have high interest (13-19%). But, if you can get rid of any negative equity in the vehicle, it can be a win.

(For Chapter 7, the credit union may also be willing to do a reaffirmation of the vehicle loan in exchange for removing the cross-collateralization. Again, you have to work the numbers to see if a redemption is a better tool. For example, I redeemed a vehicle and saved $11,000. My redemption loan rate was high, but I refinanced to 7.49% at the six month mark.)

For a Chapter 13, if the vehicle was purchased more than 910 days prior to filing (or refinanced at ANY time after purchase), you could do something called a cramdown in the Chapter 13. Essentially you'd pay the current market value for the vehicle in the Chapter 13 and the difference (plus the cross-collaterized debt) would go into the general unsecured pool.

You have to work the numbers. In some cases, it may be better (strategically) to buy a new car before filing. Yes I said that and yes I did that.

[eap82]

Would refinancing be ok?

[shipo]

eap82, one further question, are you planning on hiring an attorney, or are you planning on filing pro-se?

[eap82]

I do have an attorney I will be using.

[justbroke]

You can always refinance, so long as your credit allows. Since you plan to use an attorney, perhaps they'll look to see if you can redeem it for the lesser value (current market value) rather than refinancing any negative equity. But, a refinance, through another bank/lender, would certainly fix the cross-collateralization issue.