I have been speaking with a lot of potential clients who have taken out personal loans from credit unions, believing those loans to be unsecured when, in fact, they are secured by personal property. This can become very problematic in filing a bankruptcy.
These loans often seem attractive at the time because they allow people in a tight spot to consolidate several credit cards at a lower interest rate. However, do you need to be very careful when taking out any of these loans. Oftentimes, and especially when dealing with credit unions, it turns out these loans are secured by your personal property. That means if you fall behind or default on the loan, the credit union may be able to take your car or other personal property.
I have had a lot of potential clients who tell me that they are sure the loan is unsecured, until I have them get me a copy, and upon reading the loan document, see that it is secured by property. Clearview Federal Credit Union in particular will often secure a personal loan against a car loan that you have already taken out with them, and they will even secure personal loans with FUTURE car loans you haven’t even taken out!
These sneakily secured loans are a problem in bankruptcy, because unlike unsecured loans, they are not wiped out unless you are willing to turn in the secured property. For some clients this may be a car that doesn’t run and it isn’t a big deal. But I have had other clients with cars and campers and other personal property that they did not want to surrender. So, the loan ends up surviving the bankruptcy.
Be very careful in reading what you sign when you take out ANY loan, especially looking to see if any of your property is being used as a security against the debt. Regular banks, and not just credit unions, are capable of doing this as well, though most of what I see is either credit unions , or certain companies, like Mariner or Lendmark Financial.
Call us at 412-414-9366. If you want to discuss whether or not your personal loans will be discharged under bankruptcy. I would be happy to set up a free consultation to discuss your situation!