Back in 2014, I posted the following article here (quoted below), and everything seems even murkier now:
Yes. The fourth option below (chapter 13) is probably the best bet.
First: You can pay if off (I know, this isn’t the one you were looking for).
Second: You can refinance the truck through another lender. Just remember that if you are behind on payments for that credit card, your current credit union may refuse to release the title unless the loan balance the the truck and the credit card are rolled into the new loan.
Third: You can file a chapter 7 bankruptcy and surrender both the truck and the credit card. Just remember that if you try to re-affirm the truck loan with your credit union, they will attach that credit card balance to the loan as well.
Fourth: You can file a chapter 13 bankruptcy. In the chapter 13 bankruptcy, you can strip off that cross-collateralized credit card loan from the truck, you can change the interest rate on the truck loan to about 5%, and you can stretch out those car payments over the next 3 – 5 years, even missing the next payment due while we get the case ready to be filed.
You do have another option called redemption (after filing your bankruptcy). With redemption, you can secure an outside financing company to finance the car loan for after you file bankruptcy. However, I have never tried it with a cross-collateralized loan. In theory, it should work, and you can keep the vehicle.
The reason I am posting this today is because I have a client who wants to keep his truck loan, has equity in his truck, and even has a family member who will purchase the vehicle from the credit union and then sell it back to him over time (as his new, title-holding secured creditor). However, the credit union is refusing to sell the vehicle without us paying off the cross-collateralized loan in its entirety as well. We have offered to pay off the secured loan in full, and they refused. They would rather receive nothing, go through the repossession process, and take their lumps by selling it at auction (our chapter 7 bankruptcy will wipe out any remaining deficiency balance). It doesn’t make sense.
That being said, I am giving my client the same advice that I give to almost every client with a financed vehicle: give it up. I don’t like car payments and I don’t like the added expense of higher comprehensive insurance which is required for that financed car.