Cross collateralization/special interests CU

[Dee93til]

Hoping to receive some insight.
My husband and I are needing to file for bankruptcy. We met with an attorney to brainstorm and it went well but, I didn’t feel like he seen my case as serious (he has 27 years of experience with BKs etc).. anyway next month we’ll be ready to file..
a couple of days ago I came across something called cross-collaterization, only to realize that it applies to my situation... I have a truck loan 28k (worth 23k), personal loan 5500 and credit card 4000 with my same credit union. Big fail but also is irritating that the attorney didn’t mention this even when we told him we banked with schools first FCU.. it definitely is stated in my auto loan application that they are all now tied together (basically). My husband also has a travel trailer 22k (were full timers for his work) and a credit card 10k with golden 1 credit union however I haven’t checked to see if that have that clause as well.. we need to keep our truck and travel trailer.. filing for ch. 7 and having to reaffirm the above debt would still take out half of our debt. Total between us both about 40k (credit cards and small personal loans)... not that I’m sold on reaffirming. I basically understand what my options are based off research however, do credit unions budge in your favor? What are possible outcomes? Is it best to do ch. 13 vs ch. 7? I’m trying to minimize waste of time and any surprises. All this is so nerve wracking, I’m not behind on any payments yet however it’s heading that way for the totally unnecessary card payments. Further digging in a hole.. any suggestions?
Are there actually good attorneys who will try to get the absolute best outcome/fight for you? The attorney we seen seemed too laid back.

[justbroke]

Welcome to BKForum.

I basically understand what my options are based off research however, do credit unions budge in your favor?

When it comes to cross-collaterization, it is too dependent on the actual credit union (CU). All CUs are member-owned and they do what's best for the membership at large and not for the individual member. For the most part, a CU will not budge on cross-collaterization unless they think that a different solution would produce a smaller loss for the members.

What are possible outcomes?

The CU could demand a reaffirmation if you want to keep any vehicle which is cross-collateralized with an otherwise unsecured loan. It's possible that you could negotiate a lower APR (rate) if you chose to reaffirm the debt. Whether or not reaffirming the debt is the "right" thing to do is way too fact-specific (and debtor-specific) to address. Suffice it to say that if you can't afford the loans now, then you shouldn't reaffirm the loans.

Is it best to do ch. 13 vs ch. 7?

It spends on the purpose of filing bankruptcy. If you choose to reaffirm the debt, a Chapter 13 may be better because it would payoff the CU debt over the course of the bankruptcy. But, if you are willing to give up all the cross-collateralized debt then a Chapter 7 would have you off to your head start within 90-120 days of filing.

I’m trying to minimize waste of time and any surprises. All this is so nerve wracking, I’m not behind on any payments yet however it’s heading that way for the totally unnecessary card payments. Further digging in a hole.. any suggestions?

It can be nerve wracking, but you hire an attorney to make sense of this and to help you determine the best course of action. I just tell people that they should never try to keep things that they can't afford today.

Are there actually good attorneys who will try to get the absolute best outcome/fight for you? The attorney we seen seemed too laid back.

Nearly every BK attorney that I know try to do best for their client. It's not so much about fighting for you as it is about reality. We sometimes use the term "it is what it is" in a way to say that you are already in financial difficulty. The goal is to remove that financial albatross and get you back on your feet... the fresh start. Unless you explicitly inform your attorney that you have cross-collateralized debt at a credit union (CU) it is likely that it will not be known up front. Attorney's usually find out at the 341 Meeting when the CU offers a reaffirmation which contains all the collateralized debt.

Of course you can negotiate the reaffirmation (lower APR / rate or maybe even a reduction in the balance), but you may find it difficult for the CU to remove the cross-collateralization.

For cross-collaterilzation, there really isn't anything to fight about. The CU will either allow you to bifurcate the debt or they won't. There's nothing anyone can do or say in the bankruptcy court to change that. It's entirely the CU's decision. Typically it's the debtor and not the debtor's attorney that speaks to the CU to beg for the cross-collateraliation to be removed.

[Dee93til]

Thank you so much for all the info! I really appreciate it!