Posted On: April 29, 2010

Car Loans and Bankruptcy

A Sacramento Bankruptcy Attorney explains cross
collateralization

People like credit unions because they fit within the fabric of the community and make you feel warm and welcome when you make a visit in contrast to banks. Another important contrast with banks are cross collateralization clauses found in credit union automobile contracts.

Unfortunately these clauses are in the small print in your automobile contracts that nobody bothers to read.

Cross collateralization is when collateral such as a car is used for collateral for all other loans with the lender. So if a credit union member has a car loan and a credit card balance then, by virtue of the cross collateralization clause found in the automobile contract, the car loan is not paid off until both the car loan and the credit card balance is paid off.

This means that when people with car loan and loans with a credit union file for Chapter 7 bankruptcy and decide to reaffirm the car they are reaffirming not only the payoff amount for the car loan but the credit card balances with the credit union. This may come as a surprise to some people who think their credit cards have been discharged.

Those only paying the car loan but not the credit cards issued from the same credit union are subject to having the car repossessed.

If you have questions regarding Bankruptcy in Sacramento please contact us at (916) 492-6020 in Sacramento or (916) 724-1690 in Roseville for a free consultation or visit www.bkanswers.com and we can connect you with one of our experienced Sacramento Bankruptcy Attorneys. After you have spoken with one of our Sacramento bankruptcy attorneys, we can schedule you for a free face to face appointment in an office location nearest you. Our team of Sacramento Bankruptcy Lawyers can assist you with all aspects of your bankruptcy or legal debt settlement case. If you have questions about filing a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, a Chapter 13 bankruptcy, or would like to learn more about bankruptcy litigation, legal debt settlement, mortgage modification, lien stripping, cram down, stopping a foreclosure, wage garnishment, asset protection, discharging a debt, etc. we can help! We have bankruptcy attorneys located throughout California and Oregon who can assist you with all of your debt resolution questions. Please feel free to complete our free online bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy. We look forward to hearing from you, Sacramento and Roseville!

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