When you use a Credit Union to finance a car purchase, the Credit Union will often put a clause in the security agreement that allows it to secure any other debt that you may already have with that institution. Very few customers know that such a clause is in the contract when they sign off on their financing agreement.
Once the contract is in place, if the customer ever returns to the Credit Union to  get a line of credit, a credit card or any other kind of loan that would normally be completely unsecured, the car will automatically serve as collateral for the new would be unsecured loan. These cross-collateralized loans are a real hazard for the unwary in bankruptcy.
It is normal for a vehicle lender to demand that their bankruptcy customers sign off on a reaffirmation agreement once they have filed bankruptcy in order to keep the car, particularly if the customer has fallen behind on payments. loan. Â Debtors need to take care in either not reaffirming their car loans. Alternatively, Debtors with cross collateralized loans might want to seriously consider Chapter 13 Bankruptcy where the cross-collateralized loans might be stripped off of the car.