Q: I have unsecured debt (CC) and a secured debt (auto) with same lender. May I reaffirm the secured, dismiss unsecured?
Auto has a few thousand dollars in equity which I think is exempt. I recall there being an issue with both types of loans with the same lender. If so, is it a state law specific to Virginia?
It depends on the type of lender. Credit unions have greater rights than banks. Most credit unions have a cross-collateralization clause in their loan agreements. That makes any debt owed the credit union secured by collateral given on any other debt, so the credit union may not release the title to the car until the debts secured by the lien have been paid in full. You may be able to negotiate a reaffirmation agreement with a release of the lien as to other debts with the credit union.
Anyone contemplating bankruptcy should consult with an experienced Virginia bankruptcy lawyer.
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I practice in PA, and occasionally in DE and NJ, not VA (so not familiar with VA state law).
You do not say whether you are in a Ch. 7 or Ch. 13 bankruptcy proceeding. There are differences in what a debtor can do about secured debt, generally. Note that there is a specific provision, regardless of Chapter, prohibiting modification of an auto loan originating within about 2 years plus of the filing of a bankruptcy.
About reaffirmations- generally, yes, reaffirmations are common with respect to consumer goods collateralizing "perfected" liens, as auto loans usually are. And the law, at least, treats your auto loan as a separate claim from the unsecured credit card debt to the same lender. (Note that Visa and perhaps other credit card rules prohibit cross-collateralization, e.g., tying the credit card debt to the auto loan].
Keep in mind that reaffirmations are an agreement between a creditor and a debtor: the law does not require either party to participate, so negotiation of an agreement to reaffirm is between the creditor and debtor, who decide upon its terms, subject however to approval by the court.
That said, an auto lender should be delighted by your offer to reaffirm the auto loan. Speak with your bankruptcy lawyer to get a full understanding of the ramifications of reaffirmation of a debt.
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A: I agree that cross collateralization muddies the issue. Yes you can reaffirm the secured debt but may find the value of the car makes some of the unsecured debt secured which may have reaffirm a small portion that now is secured by a value greater than the secured car loan to the value of the car. Read your car contract for the magic collateral security language. Better yet have your lawyer look for it.
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