Evolve Federal Credit Union v. Barragan-Flores

Loan Cross-Collateralization FCU v. Barragan-Flores

Written by Taher Kameli & Chathan Vemuri The practice of cross-collateralization involves using an asset as collateral for another loan in addition to an earlier loan.[1] In the event that a debtor cannot make repayments on either loan on time, lenders can force the liquidation of the asset and use the proceeds to repay the debt on the loan.[2] This practice is used in “various forms of financing, from mortgages to credit cards.”[3] Should the debtor be unable to make timely payments on either of the loans, the debtor can establish a bankruptcy plan