Can my credit union repossess my motorcycle ifI defaulted on a car loan with them?

UPDATED: Aug 24, 2011

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Can my credit union repossess my motorcycle ifI defaulted on a car loan with them?

I have a motorcycle loan, credit card, and car loan through my credit union. I did a voluntary repo on the car, and have not paid the balance since. The credit union put a lien on the motorcycle because of the non-payment. The bike and credit card are both up to date on payments. If I were to pay off the motorcycle, can the credit union repo the bike and sell it to pay for the balance on the car? Or does it just prohibit me from selling the bike?

Asked on August 24, 2011 Florida


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

A lien like you describe does not allow the creditor to force the sale of, or repossess, the motorcycle. Rather, it encumbers the title, which means you can't sell the motorcycle without paying the lien--even if or after you have paid off the loan on the motorcycle itself. The only way they could take and sell the motorcycle for your car loan default would be if you had used the motorcycle as additional collateral to secure the car loan. That is not at all normally the case, and must be something which you had agreed to do--the bank cannnot unilaterally make property A collateral for loan B, even if they hold the loans on both A and B. If you're worried about this, check the loan agreements, to see if they do cross-collateralize at all.

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