Should I pay off the 400.00 owed to credit union?

[moonbeam9209]

I owe our credit union just over 400.00 on our auto loan for my husband's car which is prob. worth around 2500.00. We also owe them for a credit card for over 8k, which they say they have written off, but we can make payments on it if we want. duh...

So my problem is, is it better to pay off the 400.00 before filing bk so that we don't have to reaffirm the loan? I am worried because of the cross collateralization thing and wondering if it is better to have the car paid off beforehand, or is that just dumb? I don't even know if you can exempt the vehicle if the cu is not gonna give us the title anyways since we owe them for the credit card..

Please help

[GotNoMoney]

Being that it is only $400 I would be willing to try to gamble on them sending you the title. Depending on the size of the CU it might slip past. How much do you owe on the credit card? We all know that even if the car is paid off they can hold it until the other debts are paid. This where the value of the car vs what you owe the CU comes into play.

Also it depends on if your CH7 or 13 and depending on the values and debt you may want to start with a Ch13 to cram down the loan amount at the CU and then convert to a 7 later.

Really need some numbers here to make an informed decision along with your states exemptions to consider.

If you an throw some numbers up that would help. Also have you had a consultation with an attorney yet?

[moonbeam9209]

Last I knew, we owed around 8k on the credit card. The car is worth around 3500-4000.

If I am filing bk, should I go ahead and pay the 400.00 to take a chance on them giving me the title, and if the car is paid off and the credit card is discharged in bk, will they have to give me the title?

I am speaking with a couple of attorneys this week. I have a judgement against me from Target Visa for 8k that was just entered of Feb 11th. I thought I had until the court date on March 17th, but apparently not.

Oops...sorry I left out the fact that I live in Georgia where the exemption for an auto is 3500.00 per person, and I also own a car worth 10k that is paid off.

Thank you!

[BKDefender]

If you only owe them $400.00 and are able to pay it off, I would recommend you pay it off. Even if you owed $3k on it and could afford it, I would still recommend you pay it off. Payments made to a secured creditor are not those that can be reversed by the trustee as a preference payment if you can exempt the equity, including that payment, in the vehicle. You're allowed to convert non-exempt cash into exempt secured equity prior to filing bankruptcy.

--William

[moonbeam9209]

That makes sense. I appreciate your input. We will go ahead and make our final payment as soon as I get our tax return, and save the rest for a lawyer. I have a friend who is a paralegal and has worked with a bk attorney in the past. She has told me that she would help and walk me through filing pro se, but I am really nervous since there are assets such as our cars and the house involved. (and a total of 14 credit cards and numerous medical bills)

Lastly, my other question in regards to this is: If we pay this auto loan off, even though they have told us that they wouldn't release the title since we owed them for the credit card, if the credit card is included in the bankruptcy, will they then give us the title to the car, or is there some other procedure in regards to this?

[BKDefender]

If you pay off the amount you owe on the car loan and discharge personal liability on the credit cards, I can't see how they could claim they have the right to withhold the title from you. Under their logic, if you bought a car using a loan from their credit union and you owed them $1.00 on a credit card that you never paid off, they could keep your title from you.
If they refuse to give you the title to your car after you have paid off the only loan you had on that car, then your attorney should request sanctions against them for attempting to collect on a pre-petition debt by refusing to give you that title.

--William

[moonbeam9209]

I only know that they called specifically to let my husband know that even after we paid off the car, they wouldn't be releasing the title because we owed them for the credit card(credit unions are known for cross collateralization), and a few weeks ago when he spoke to them again about making a payment on the car and what would happen after the auto loan was paid in full, they said the credit card was "written off", but we could make payments on it if we wanted. Maybe they are playing games with us?

So I assume that even though the car is collateral for the credit card loan, they can't keep it if the bk is discharged? Or will they be able to convince the courts that we have to return the car in order for the credit card to be discharged? I am thoroughly confused now...

Sorry, I don't mean to sound dumb, it is all just so confusing....

[dscurlock]

I only know that they called specifically to let my husband know that even after we paid off the car, they wouldn't be releasing the title because we owed them for the credit card(credit unions are known for cross collateralization), and a few weeks ago when he spoke to them again about making a payment on the car and what would happen after the auto loan was paid in full, they said the credit card was "written off", but we could make payments on it if we wanted. Maybe they are playing games with us?

So I assume that even though the car is collateral for the credit card loan, they can't keep it if the bk is discharged? Or will they be able to convince the courts that we have to return the car in order for the credit card to be discharged? I am thoroughly confused now...

Sorry, I don't mean to sound dumb, it is all just so confusing....

did you read your car loan contract? a loan binder that binds
your car loan to your other debt until they are paid off?

your car loan should have nothing to do with other loans...

this sounds unjustified...

surely talk to your atty about what they said...

[SMinGA]

Maybe ask an attorney before paying it? I know its 'only' $400, but regardless of the CU can you get the title issue, you're increasing the value of non-exempt property.

[moonbeam9209]

I thought about the fact of increasing value, but didn't know if it would be worth the 400.00 just so that I didn't have to reaffirm the debt of 400.00 with them after bk.

Also if they will have to release the title after I file since it would be paid off and their credit card would be included in the bk?

I wonder what the judges do in the case of cross collateralization with credit unions. Doesn't seem like they could hold the car title if the credit card is discharged, but maybe they would have objections at the 341 because of their cross collateralization issues and I know that it is in the loan paperwork since I took out a personal loan against my car which was already paid off (we had to do some work on our house after hurricanes Frances and Jean when we lived in Florida.

Anyone know?

[SMinGA]

That I can't answer... Cross-collateralization may give them the right to retain the title, I really don't know. If they can legally claim the credit card debt has the vehicle as collateral, then they can probably hold onto the title. If that is the case, then paying $400 would not get you anywhere and you don't really have to worry about exempting the car.

A discharge means you're not obligated to pay the debt, but it does not make them obligated to release the title if they have a valid security interest in it. The question becomes whether or not they can claim the car as collateral on the debt and that is probably answered in the CU credit card terms.

[GotNoMoney]

This is what the point of a cross collateralization clause is, if you BK against the CC then they have the right to recover against the vehicle....

Here read this, and again get a real attorney. People on these forums just don't know enough to give sound advice.

http://www.allmandandlee.com/bankruptcy_blog/bankruptcy/watch-out-for-cross-collateral-clauses-on-credit-union-loans/

Like I said before, you may have to file a Ch13 to make it work. At this point it is a $400 gamble that is might slip past them....other than that, no you can't BK against the CC debt and take the car....that is the whole point of a cross collateraliazation clause.

[lwh1961]

This is what the point of a cross collateralization clause is, if you BK against the CC then they have the right to recover against the vehicle....

Here read this, and again get a real attorney. People on these forums just don't know enough to give sound advice.

http://www.allmandandlee.com/bankruptcy_blog/bankruptcy/watch-out-for-cross-collateral-clauses-on-credit-union-loans/

Like I said before, you may have to file a Ch13 to make it work. At this point it is a $400 gamble that is might slip past them....other than that, no you can't BK against the CC debt and take the car....that is the whole point of a cross collateraliazation clause.

I am in this same situation with my car. Is the reason Ch13 works because they get paid for a portion of their credit card and they consider the credit card paid in full?

Thanks

[moonbeam9209]

Well, I can't file ch. 13. We don't have any steady income, and certainly not enough to pay off 70k or more in debt.

I went ahead and paid the last car/loan payment.

They at least show the loan paid off, and they have quit calling. As far as what we owe them for the credit card, they say it has been "written off". Not sure if that means they sold the debt, or what????

I really am not worried unless they were planning on coming to get the car. For now we can drive it, and start getting our bk papers in order. I think I am going to file pro se. I have a friend who is a paralegal and has worked with bk attorneys, and she says she will help walk me through it.

I still have so much paper to get organized. We had at least 14 credit cards, medical bills, and I want to make sure I don't miss anything.