My Credit Union Says They Can Reposes My Car Because I’m Behind On My Credit Card Payment. – Mike

“Dear Steve,

I am up to date on my car payments but behind on my Visa payments. My credit union in Atlanta, Ga says they can seize my car because the Visa is secured by it and I never new about this, or the fact that they I had a secured Visa card. I do not live in Ga. I live in NC. I have told them that I am trying to pay off my car 1st and then will attempt to pay off my Visa. This does not stop them from calling me.

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I would like to know if they have a legal right to repo my car if I continue to pay my car payments and not my visa. I would also like to know if they can repo my car here in NC, and what are my options. I have been out of work for two years and have barely been getting by on food stamps and a part time job that pays 750.00 a month.


Dear Mike,

The kind and friendly credit unions bury a “cross collateral” clause into loans. Basically what it says is that all loans are secured with any collateral held by the credit union. So a default on a credit card could result in a repossession of your car since the car is used to secure the credit card account.

Do you think you could owe twice as much as you thought on your car loan? It could be true, if your car loan is owed to a credit union, you owe a large credit card balance to the credit union, and if the dreaded “cross collateral clause” is lurking in the fine print of the car loan agreement.

A cross collateral clause is a provision which states that the item of security (usually your car) secures any other debts you ever come to owe the credit union. Cross collateral clauses usually appear in the fine print on the second or third page of the car loan agreement, placed where it is unlikely anyone will ever see it. These tiny land mines are planted only by credit unions, never by banks. The credit union will virtually never point out the presence of a cross collateral clause, until much later, after someone steps on this land mine by failing to pay on the other loan obligation. – Source

You have a duty to inform the credit union where the car is located. Hiding the car from them intentionally would be illegal.

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As far as options go, even bankruptcy to protect the car may be limited to a Chapter 13 bankruptcy. You’d need to click here to talk to a local bankruptcy attorney about this.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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