My response:
This is probably the ONE and ONLY instance where a bank or credit union would be required and forced to cancel a loan contract, without repercussions to the consumer.
You see, all you have to do is show the CU proof that the boat was stolen; e.g., crime report, etc. - - perhaps, even have the detective contact the CU. As such, your contract with the CU is "voidable", at your request and discretion, because the "object of the loan" (the boat) was stolen, and the contract fails for "lack of legal consideration" (consideration is an exchange of money for the boat). The boat is "security" for the loan; e.g., if you were to default on the loan, the CU would repossess the boat. But, because the boat is stolen property, the CU could NEVER obtain a "security interest" in the boat, or obtain ownership of the boat. So, the security for the loan fails.
A consumer cannot have the benefit of, or be responsible for, a contract when one of the elements of a valid contract (lawful consideration) is missing. In other words, you have what looks like a contract, feels like a contract, and signed like a contract - - but, it isn't a contract. Or, at least, it isn't a "valid" contract.
So, first try to talk with the CU to explain the situation and to show them the documents on the boat, and confirm the same in writing to whomever you speak with at the CU. If, for some reason the CU won't budge (hard to believe), then you should hire an attorney who specializes in contract law.
The bank is the one who is "on the hook" for the money that was loaned to you, and will merely push the amount from the "active side" of the ledger, to the "innactive side" of the ledger, and write off the loss on it's taxes. It's the same concept as if the "thief" went into the CU and robbed them at gunpoint. The only difference is that there is some "paper" in between the CU and you.
Once the situation is explained and proven to the CU, they cannot go after you, or harm your credit report.
Good luck to you.
IAAL
[Edited by I AM ALWAYS LIABLE on 07-16-2001 at 12:08 PM]