Reaffirming with a credit union

[CARVER]

Hello all. I have a couple of questions that Google can't seem to help with. Also, am unable to get a straight answer from my attorney. I want to make sure I do the right thing in this situation.

I am in the middle of a chapter 7. Have my creditors meeting in 3 days.

I have two loans with the same credit union - NFCU. They have sent reaffirmation agreements for each of them and have agreed to waive the cross collateralization clause on each. One is a vehicle and one is a boat (liveaboard type but not currently living on it).

I would like to reaffirm the boat for sure but I am undecided on if I want to keep the vehicle. Recently has been giving me problems and it just suffered a considerable amount of hail damage which it will be going in for repair on next week.

My attorney is saying that he is unsure of how they will feel if I reaffirm one and not the other. If it came down to keeping or losing the boat I would reaffirm both to keep them happy but they sent two separate agreements.

Have any of you encountered this before? I'm in MD if that makes a difference.

Thank you in advance!

[justbroke]

I can tell you that NFCU does not like to be on the losing side of anything. I suppose they'd let you reaffirm one piece of property but not another. What they may do to your accounts is the real question! I suspect, as a member-owned organization, they will no longer allow you to have certain credit products which may include things like NAVCHEK. Incidentally, they may deny you a checking account if you don't otherwise qualify (have the ability to apply) for NAVCHEK. You may be a member, but you may be restricted to just a share savings account and that remaining loan.

It's anyone's guess at this point. The simple fact is that credit unions do not like to be at a loss. My general feeling is that I would always want to stay in the good graces, personally, with NFCU because they are a discretionary lender and very generous.

How much is left on the car? If it's less than $1K, it may be worth it to keep the relationship.

(Please be aware that I despise reaffirmations, but you are with a credit union and the relationship may be worth the hassle. This should be a financial decision. You need to evaluate the value of the property compared with what you owe and balance that against this banking relationship.)

[CARVER]

Understood. Thanks for the response. The vehicle has almost 31K left on the note. As far as my other accounts there, I'm pretty much at a loss. They emptied my accounts. I now bank with ally. They are getting burned on a 15K credit card and a 34K personal loan. They obviously do not want my business.

[justbroke]

Did they close your checking account? That's usually a very good indicator that they don't like you any longer.

Understood. Thanks for the response. The vehicle has almost 31K left on the note. As far as my other accounts there, I'm pretty much at a loss. They emptied my accounts. I now bank with ally. They are getting burned on a 15K credit card and a 34K personal loan. They obviously do not want my business.

I would say it's a loss. I would not reaffirm a vehicle that has a $31K note balance; especially if it has issues and recent damage.

You may just have to say good-bye to NFCU forever.

[CARVER]

I agree with you. Just not sure how to handle reaffirming the other loan with them.

Was considering giving them a call to speak to someone in their Bankruptcy staff. It's just a tricky situation because they handle all correspondence through the attorneys currently.

[justbroke]

You would only reaffirm the loan for the property that you want to keep. That is why they have the clause removing the cross-collateralization from each of the vehicles (car/boat) individually.

The rest of your relationship with NFCU will become soured. You can only speak through the attorneys (and you should be using your attorney) because no one wants to violate any terms of the bankruptcy automatic stay (11 USC 362).

[CARVER]

Thanks. I'm glad I have the opportunity to reaffirm. Just seemed odd that I could possibly pick which loans that I wanted to reaffirm through the same lender.

[justbroke]

I can tell you why they allow you to pick. It's either allow you to pick and choose or they "eat steel." The industry term, eat steel, means that they get a piece of metal back that won't taste too good (because of the depreciation and cost of sending it to the auction and selling at auction prices).

[CARVER]

Makes sense. I appreciate the clarification. Really just wanna make sure I make all of the right decisions on this one.

[justbroke]

Your decision should be a financial decision. Remove all emotion and do the thing that will ensure you have a fresh start. I believe that you have already separated the emotion from these decisions, but I wanted to reinforce the point. You can love your Credit Union, but it will never love you after you discharge debt.

[CARVER]

Again, much appreciated. Headed to the meeting today. Hopefully I'll be able to make that decision before I am called with the help of my attorney. Just dreading the rates that I'll see for a used car after. Considering renting one for a few months. I've got a 43 mile each way commute so reliable wheels are definitely a priority.

[leonel9]

How did the 341 meeting go?

As far as your NFCU deposit accounts (checking/savings), the credit union will not close your accounts as a result of bankruptcy. Just yesterday I (NFCU employee) assisted a member with two charged-off credit cards NOT included in bankruptcy, who is performing transactions as usual. One day she may loose money on deposit via setoff, but for now she has payment arrangements with collections.

The bankruptcy discharge will prevent collections activities. It is true, though, that Navy Federal does not like losing money. It is unlikely you will get approved for additional credit with them if they took a loss.

[CARVER]

I think it went well but the U.S. Trustee specifically requested to question me in the presence of my attorney. In my chapter 7 I had asked to reaffirm my boat loan with NFCU. Current loan amount near 50K - 475 per month (NFCU has value at just over 30K on the reaffirmation agreement). He approached my attorney and said that if we got rid of the boat, I could possibly be moved to a chapter 13. So maybe it didn't go so well.

I realize that a boat is purely luxury and I cannot argue that. The U.S. Trustee said that he would reach back out to my attorney and let him know what he wants to do. The state trustee pushed everything through on his end just fine.

I was the only one questioned by the U.S. Trustee...

Not sure where this one is going to end up.

In following up, I gave him my documentation that explains what brought me to bankruptcy so that he could get the whole picture. Not sure if it will help or not but I wanted him to see that I had done everything that I could to avoid filing in the first place. This was the same documentation that I had to use for my employer.

[justbroke]

When someone from the UST's office is at the 341 Meeting and is asking questions, it is not the end of the world, but that means that you have peaked the curiosity, the interest, of the United States Trustee. If you used the $475/month as an expense then the UST may try to say that the amount is a luxury and not necessary. The kicker will be whether your DMI is negative enough to deal with the $475 that may get added back.

You really will need to just wait and see.

[CARVER]

Understood. I'm not sure because I didn't fill out all of the forms but I'm thinking that if he takes the 475 away, then I wouldn't qualify for a 7. I've searched online about how that works but I guess I'll have to wait to see what my attorney comes back with.

Couldn't find too many cases where a 7 was turned to a 13 or that it was extremely common. I suppose if it gets changed to a 13, then I'll have to wait and see what they come up with for my payment plan. Hopefully I get an answer soon. My discharge is supposed to be mid May if everything goes well and I'm of course hoping that it does.

Unknowns are never fun...