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continue to pay consolidation bank loan secured by car?

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  • continue to pay consolidation bank loan secured by car?

    Last year, trying to stay afloat, I consolidated my credit card debt into a $12000 credit union loan, secured by my 10 year old car worth about $6000 retail and $3300 clean tradein. Now that I will be declaring chapter 7 I assume I should continue paying this secured loan, because I want to redeem the car? I live in Iowa where there is a $7000 auto exemption (which confuses me).

  • #2
    Originally posted by Kristy12 View Post
    Last year, trying to stay afloat, I consolidated my credit card debt into a $12000 credit union loan, secured by my 10 year old car worth about $6000 retail and $3300 clean tradein. Now that I will be declaring chapter 7 I assume I should continue paying this secured loan, because I want to redeem the car? I live in Iowa where there is a $7000 auto exemption (which confuses me).
    As I wrote in the other thread, you could Redeem the car! I hope that you plan on changing from that Credit Union to another bank. The credit union is not going to like losing a bunch of money. Again, you could redeem the car for, probably, the $3,300 you have for clean trade-in (a/k/a wholesale value). The rest of the loan would be discharged as an unsecured debt.

    You will need to find financing for the Redemption and 722 Redemption, a US Bank company, can do that. There are probably a couple of other financing companies that do Redemption loans, but I don't know them. The rate will be high (in the 19-24% range). But, if you keep your credit straight after discharge, you should be able to refinance in 6 months after discharge... even if the rate is 14%, that's better than 24%!!!
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      Thank you for your advice, i did see your other post. I was just confused as to whether or not to contine paying this debt, as I understand I should continue to pay secured debts but not unsecured debts.

      Thank you for your help.

      Comment


      • #4
        You would only continue paying secured debts that you are not going to discharge. When it comes to vehicles secured by a loan, I would not stop paying until shortly before filing for bankruptcy. If you are going to file soon, make sure you discuss, with your attorney, the possibility of redeeming the vehicle and what steps you need to take. Redemption requires more work on the part of the attorney (or debtor). Redemption should be pursued and the loan secured almost day #1 of filing!
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          Originally posted by justbroke View Post
          You would only continue paying secured debts that you are not going to discharge. When it comes to vehicles secured by a loan, I would not stop paying until shortly before filing for bankruptcy. If you are going to file soon, make sure you discuss, with your attorney, the possibility of redeeming the vehicle and what steps you need to take. Redemption requires more work on the part of the attorney (or debtor). Redemption should be pursued and the loan secured almost day #1 of filing!
          Concur. This is a lot of homework, but an absolute necessity if you don't want to find an empty space where you last saw your car. Ask if you have questions on how to do this.... Don't want to screw it up....

          Comment


          • #6
            Originally posted by btbeme View Post
            Concur. This is a lot of homework, but an absolute necessity if you don't want to find an empty space where you last saw your car. Ask if you have questions on how to do this.... Don't want to screw it up....
            Thank you. Here' s another question about car redemption. I have 3 loans with my credit union.

            1) an HELOC, secured by my house, which is underwater, so I would stop paying this 90 days prior to filing.
            2) a consolidation loan, secured by my car, and I would like to redeem the car. I would stop paying this loan 90 days before too.
            3) a personal, unsecured loan, which I would stop paying too.

            My question to you all, is that stopping payment on all three loans from my credit union would probably violate their cross-collateration policy, and they may try to reposses my car before I can get the money to redeem it.

            Your thoughts or advice?

            Comment


            • #7
              If it was me, I would buy a new car and stop paying them all soon, You will need a car dependable and an old car is more likely to die.
              Paying one and not the others will not work with the CU: Why not get a true freshstart. The Cu tried their best to get me to reaffirm my loan to rebuild my credit, I did not take the bait. I wanted a fresh start.

              Not sure what they will do , if you want to pay one not the other, maybe it might depend on the CU.
              chpt 7 ,5-2009

              Comment


              • #8
                It is really up to you. Realize that you would need to file quickly if you stop paying on a CU loan since almost ALL their loans are cross-collateralized against one another. Even the ones you don't think are collaterialized, such as your personal loan!

                If you are going to Redeem, you need a strategy so that they don't come and get the car after you stop paying on one of the cross-collaterizlied loans. That may include, as suggested, going to find a "new" car. However, redemption can be done, it is just that you are in a precarious position in that you are with a CU and you have other loan products with them.

                Filing bankruptcy would stop the repossession efforts. You would file a motion to redeem and you would secure financing, such as through the company I mentioned earlier. They can't do anything while your case is pending.
                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog


                I am not an attorney. Any advice provided is not legal advice.

                Comment


                • #9
                  Thank you all so much for your help. I've been reading all the posts and am a bit overwhelmed, so I apologize in advance if this question has been asked and answered already.

                  As mentioned above, I have a credit union loan of about $12,000 secured by my 2003 car, and the car is now worth only about $3,000. Along with this secured loan, I have 2 additional unsecured loans with the same Credit union. Total owed for all 3 loans is about $25,000.

                  From what I've read, I can redeem the Car through a chapter 7 for a lump sum payable asap to the Credit union. If I have to file Chapter 13, I can cramdown the $12,000 loan to the Value of the car, and pay that value, as a loan, over a period of time.

                  But, my car is 10 years old, with 127,000 miles. I read that cars need to be no older than 7 years old to redeem or Cram-down. Is this true?

                  Also, if I decide to forfeit the car, and stop paying all 3 of the loans from the Credit union, they'll probably reposses, right?

                  I just don't know what I should consider doing, especially if I want to stop paying all my loans from the credit union for 90 days before filing.

                  Comment

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