CALL FOR A FREE
INITIAL CONSULTATION
813.254.5696

BRIDGING YOU TO A BRIGHTER FUTURE

Bankruptcy and Cross-Collateralization: What You Need to Know

Bankruptcy and Cross-Collateralization: What You Need to Know

Loan CollateralEveryone’s financial situation is different, which makes each and every bankruptcy unique – and potentially complicated. One of the things that might make your bankruptcy more complicated is a loan affected by cross-collateralization.

If you have a loan through a credit union and you’re considering bankruptcy, you’ll want to speak to a bankruptcy attorney about how the loan and any cross-collateralization might affect filing.

What is Cross-Collateralization?

Cross-collateralization is a practice used by some credit unions for loans for larger items, such as cars or boats.

Many lenders ask for collateral and use that collateral when a borrower fails to meet payment obligations. For instance, in a mortgage, the collateral is the home. But there are also loans that are usually not secured with collateral, such as credit cards.

Credit unions sometimes include a clause in their loan agreement that not only uses collateral for the specific loan in question, but also for other loans obtained through that lender. For instance, if you have a vehicle loan through a credit union and you apply for a personal loan or credit card, your car could be used as collateral if you default on the personal or credit card loan. Depending on the terms of the loan, your car could still be collateral even if you pay off the vehicle loan.

Cross-Collateralization and Bankruptcy

If all goes well and you’re able to repay all of the loans you have through a credit union, you won’t need to worry too much about cross-collateralization. But what happens if you experience financial struggles and are forced to file for bankruptcy?

In general, when you file for bankruptcy, you must pay back any secured loan or you risk losing the property used as collateral for that loan. Unsecured loans, such as credit cards and other personal loans, are usually discharged in bankruptcy, which means you don’t need to repay them. If you file for Chapter 13, you usually end up paying back only a portion of your unsecured loans, if that.

However, those with cross-collateralized loans experience a different scenario. Cross-collateralization makes a loan “secured“. This means you’ll need to repay the loan in order to keep the collateral, even if the loan was not directly linked to the collateral.

For instance, let’s say you have two loans through a credit union. One is for your vehicle and the other is a credit card. You choose to file for bankruptcy and you’d like to keep your vehicle. This means you’ll need to pay both the vehicle loan and the credit card loan in order to retain ownership of your vehicle.

For more information on the differences between secured and unsecured debts and how these debts are handled in bankruptcy, check out this information from The Balance.

Working with an Attorney Can Help You Navigate Cross-Collateralization and Bankruptcy

It’s easy to see how cross-collateralization can complicate filing for bankruptcy. Many of the rules that apply to traditionally unsecured debts in bankruptcy are different when a loan becomes secure through cross-collateralization.

If you’d like to know more about bankruptcy and cross-collateralization or you’re filing for bankruptcy and you have concerns about how your property will be affected, we can help. Contact the Law Office of Robert M. Geller at (813) 254-5696 to schedule a consultation.

Tampa Bankruptcy Law Blog

Tips for Handling Creditor Harassment

Tips for Handling Creditor Harassment

Creditor Harassment and Bankruptcy Dealing with a significant amount of debt is difficult enough, but when creditors began hounding you...
Read More
Unexpected Debts that Can Lead to Bankruptcy

Unexpected Debts that Can Lead to Bankruptcy

Unexpected debt can cause financial issues and Bankruptcy Unemployment, poor management of credit cards and even divorce can push people...
Read More
What You Need to Know about Tax Identity Theft and How It Can Affect Your Credit

What You Need to Know about Tax Identity Theft and How It Can Affect Your Credit

Tax Identity Theft and Credit The increasing popularity of filing tax returns online has given way to a rise in...
Read More
How To File for Bankruptcy [Infographic]

How To File for Bankruptcy [Infographic]

The Bankruptcy Filing Process Need to file for bankruptcy but not sure where to begin? The Law Offices of Robert...
Read More
Five Things You Need to Know about Bankruptcy Fraud

Five Things You Need to Know about Bankruptcy Fraud

What is Bankruptcy Fraud The average person filing for bankruptcy has no intention of committing fraud. He or she is...
Read More
The Importance of Being Prepared: What You Need to Bring with You to Your Bankruptcy Consultation

The Importance of Being Prepared: What You Need to Bring with You to Your Bankruptcy Consultation

Preparing for a Bankruptcy consultation with a Bankruptcy Lawyer Filing for bankruptcy is a big decision. One of the most...
Read More
Should I Use My Retirement Savings to Avoid Bankruptcy?

Should I Use My Retirement Savings to Avoid Bankruptcy?

Financial problems can occur at any age. For those who are older and facing financial challenges as they near retirement,...
Read More
Credit Reporting Errors: Why You Need to Review Your Credit Report before Filing for Bankruptcy

Credit Reporting Errors: Why You Need to Review Your Credit Report before Filing for Bankruptcy

The importance of correcting credit errors before filing for bankruptcy Some people are shocked to learn how common it is...
Read More
Why Delaying Bankruptcy Might Be Your Biggest Financial Mistake Yet

Why Delaying Bankruptcy Might Be Your Biggest Financial Mistake Yet

Bankruptcy Mistakes There are those who are pushed into bankruptcy because of a medical emergency or the unexpected loss of...
Read More
Bankruptcy Dismissal vs Discharge: What’s the Difference?

Bankruptcy Dismissal vs Discharge: What’s the Difference?

The difference between bankruptcy dismissal and bankruptcy discharge For many, bankruptcy is unfamiliar territory and there are a lot of...
Read More

Contact Us

Search Website

Archive

Request a FREE Consultation

For The Next 5 Days Get A Free Book About Bankruptcy


 
comodo10.0Robert Marc Geller
Robert Marc GellerClients’ ChoiceAward 2018Robert Marc GellerReviewsout of 32 reviewsLEA

We are A Debt Relief Agency.
We help people file for
bankruptcy under the Bankruptcy Code

Pay Online   Bankruptcy Courses   

Tampa Office

$Law Offices of Robert M. Geller, P.A.
807 West Azeele Street
Tampa, FL 33606
T: (813) 254-5696
T: (800) 853-7549
F: (813) 253-3405


Tampa Law Office Map

St. Petersburg Office

$Law Offices of Robert M. Geller, P.A.
125 5th Street South
(Wells Fargo Financial Center)
2nd Floor, Suite G

St. Petersburg, FL 33701
T: (727) 532-3939


Map and Directions

Pasco Office

23526 State Road 54
Lutz, FL 33559
T: (813) 336-2320





Maps & Directions

At the Tampa Bay law firm, the Law Offices of Robert M. Geller, P.A., we help people with consumer bankruptcy matters in the Tampa Bay-St. Petersburg,  Florida communities such as Clearwater,     St. Petersburg, Tampa, Thonotosassa, Riverview, Lutz, Plant City, Brandon, Carrollwood, Wesley Chapel, St. Petersburg Beach, Lakeland, Mulberry, Dade City, Pinellas Park, Largo, Seminole, Odessa, Oldsmar and Lithia, and counties such as Hillsborough County, Pinellas County, Pasco County, Polk County and Manatee County.