Problems of Cross-Collateralization with Bankruptcy in Phoenix

At the Pew Law Center, PLLC, we are seeing an increase in cross-collateralization cases with bankruptcy in Phoenix. The property secured by one loan crosses over to secure every other loan with the same lending institution. Cross-collateralization can be involved in any number of secured loans – for vehicles, boats, equipment, trailers, recreational vehicles, home equity and even business loans. Although much more common with credit unions, the arrangement can be found in secured loans from banks as well. Attorney Lawrence ‘D’ Pew wants you to understand how cross-collateralization is involved with bankruptcy in Phoenix.

Bankruptcy in Phoenix Discloses Cross-Collateralization Clauses.

When your loan instrument has language similar to the following, you likely agreed to cross-collateralize your loan with your credit union. The cross-collateralization clause will read something like this:

“The property that is given as security for this loan, or property given as security for any other loan, will secure all amounts owed to the [bank or credit union], now and in the future.”

This simple turn of legal phrase has significant consequences for credit union members filing for bankruptcy in Phoenix.

Consequences of Cross-Collateralization for Bankruptcy in Phoenix

Consumers need to understand that cross-collateralization is very beneficial to credit unions. Unfortunately, although legal in Arizona these agreements are often very detrimental to borrowing members. If you plan to purchase a vehicle and take out a loan with your credit union, then examine the collateral provisions in the loan documents very carefully. Once you understand the significance of cross-collateralization, you may decide that the deal isn’t all that great after all.

With bankruptcy in Phoenix, we have seen far too many credit unions using these agreements to the disadvantage of their borrowing members. Here is an example of how cross-collateralization works against the borrower. Once the clause is agreed to, the credit union will retain title to the property even after it is fully paid for, so long as there is another outstanding loan with that credit union. Another outstanding loan could very well be a credit card debt.

A member can pay off a car loan, and the credit union remains on the title.

When bankruptcy in Phoenix is likely, cross-collateralization adds another layer of complexity to the case. The credit union can prevent its member from selling the vehicle to raise cash, even if the vehicle loan was fully paid. When a member wants to sell off the asset to pay other debts, the credit union may block the sale so long as it remains on the title. And the credit union remains on the title until every obligation owed to it by the member is paid or settled, including credit card debts

When the loans occurred is of no consequence with cross-collateralization.

This is what Lawrence ‘D’ Pew has experienced over the years in representing consumers who file for bankruptcy in Phoenix.

Say, for example, that a member signs an installment loan agreement with a cross-collateralization clause in 2005 to purchase a truck. In 2007, the member takes on a home equity loan with the same credit union. Everything is going well and the vehicle is paid off in 2008. In 2010, however, the member has some financial problems and defaults on the home equity loan. Under the cross-collateralization clause, the home equity default allows the credit union to repossess the truck, even though that loan was paid off.

Consumers need to know for purposes of bankruptcy in Phoenix – until every loan is paid in full, the credit union retains the power to repossess the member’s property. That is the danger of cross-collateralization, and it is a serious problem for individuals seeking bankruptcy in Phoenix.

Chapter 7 Bankruptcy in Phoenix and Cross-Collateralization

If you believe you have a problem loan, you need to speak with an attorney at the Pew Law Center for bankruptcy. In Phoenix, credit unions are enforcing more of these loans against their members. The member is cajoled into continuing making the installment payments on the vehicle, believing he or she will keep it so long as those payments are current. In the meantime, the credit union is prepared to repossess as soon as the member defaults on any other loan it has with them. This special situation requires experienced debt relief analysis for Chapter 7 bankruptcy in Phoenix. Before you throw good money after bad, learn what your rights are from Lawrence ‘D’ Pew at the Pew Law Center.

Contact the Pew Law Center for Bankruptcy in Phoenix

When you need debt relief for Chapter 7 bankruptcy in Phoenix, the Pew Law Center’s bankruptcy team is there to help you through every step in the bankruptcy process. Our reputation for excellence is built on consumer bankruptcy in Phoenix and throughout Arizona. We will shoulder the legal and emotional burdens for you, so you can enjoy peace of mind once again.

Are you considering bankruptcy? In Phoenix and surrounding communities, call us at 480-719-1479. We will schedule a FREE VIP Bankruptcy Consultation for you with an experienced bankruptcy attorney. You can also contact us by email or chat online with a representative of our team, 24/7. For unsurpassed bankruptcy in Phoenix, area residents know there is no shame or blame at the Pew Law Center.