Working with credit unions when you are in good standing is great, however it is very difficult when you are behind on your loan payments. They take it personally when a customer defaults on a payment agreement or the debt becomes discharged during a bankruptcy. They have lost money when you stopped paying and often they will legally try to take back the property or collect on the unpaid loan. The credit union will make every attempt to recover the money you originally agreed to pay.
Most credit unions are not large operations and only a few people may be assigned to handle collection or bankruptcy cases. Because of this, the employees who are in charge of these issues are often very diligent in recovering this loss, and they know their business well.
Regarding home loans, Chapter 13 bankruptcy permits you to eliminate a second lien on your home as long as the value of your home is worth less than what you owe. If at the time of your filing the loan is worth $200,000 and the first lien balance is $2000,001 or more, you would be able to eliminate all second or subsequent liens. You are not allowed to eliminate any second lien when the value of the property is $1.00 greater than what you owe on the primary lien. Even one dollar of value beyond the primary lien means that you are unable to get rid of any other lesser liens on the property through a Chapter 13 filing.
Credit unions know bankruptcy case laws very well and are very astute when attempting to collect on unpaid loans. Their information is up to date on monitoring home values and know where they stand it this attempt to collect on your debt. They realize that they may not recover the entire balance of the lien, but they know that at least something can be recovered through a sale during a foreclosure. They will want to get as much of their investment back as possible. You will want to get an appraisal to see whether the value is still low enough to consider a Chapter 13 and eliminate the second lien. That appraisal will be used as evidence in your Chapter 13 bankruptcy case to show that the credit union lien can be eliminated. You will want to be prepared to get into a fight with the credit union because they will attempt to present an appraisal showing that their lien can’t be eliminated.
Considering filing Chapter 13 may not be the best option if your only goal is to get rid of a secondary lien on your home. To keep your home, you may have to begin to pay the credit union back, however they may not accept your request for a loan modification or repayment plan if you are significantly in default.
For additional information regarding bankruptcy please get in touch with the experienced southern California bankruptcy attorneys at Westgate Law.