The commercial loan is for secured vehicle equipment and it is currently in default. We are in litigation on the warranty of this vehicle; as such we have asked the finance company for a reduced payment plan while we are in litigation as the vehicle does not run and the OEM is not providing warranty support; however they said no to a reduced payment and instead we reduced the payment any way from $1,300 to $500 per month and now it has gone into default. We have 3 other good standing equipment vehicle loans with the same finance company --- is it possible for the one defaulted loan to directly affect the good loans and could they repo the good loans and equipment due to the defaulted loan. Each equipment loan is a separate contract. I just want to be sure that they cannot take or repo our good standing equipment.
A lawyer would need to analyze each of the relevant agreements to answer this question. No one can do so based solely on the limited information provided here.
That said, in my experience it is common for lender agreements to include cross-collateral provisions by which collateral for any other loan may be seized to satisfy a defaulted loan. Accordingly, it is likely that you are justified in being concerned that the bad loan may jeopardize the other vehicles.
You should retain an experienced business lawyer to examine the agreements and advise you accordingly.
This information does not constitute legal advice and does not establish an attorney-client relationship.
It is possible. As Mr. Shultz stated, it is a term known as "cross collateralization" and it appears to be used across may types of loans. I have seen it even in credit union loans, so I would not be surprised if it is in commercial loans.
I would consult with a bankruptcy attorney who handles commercial business reorganizations. The attorney can apply for restructuring the debt (with BK court permission) under the bankruptcy code and save you from the lender's terms that might result in shutting down your business. Do this before things turn against you, would be my practical comment.
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Anything is possible. The answer to most contracts questions begins with "what does the contract say?" For a lawyer to answer this question competently, that would need to be a part of the analysis, and probably the most important part as well.
This answer is not intended to be legal advice to be relied on by the asking individual, as legal advice of that level can only be provided after a review of necessary case materials and input from the asking party. Further, no other person should rely on this answer without consulting an attorney as to how it impacts on his or her case. No attorney-client relationship is formed by answering this question.
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