Is there any way to get the cross-collaterized credit card loan off of my truck loan with my credit union? (updated from 2014)

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.

I’d like to update this.  

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.

My bankruptcy case was dismissed. How long until my creditors find out?

Generally, you do NOT want your bk dismissed, but it happens.  Sometimes clients forget to pay their filing fees to the court, or they miss a hearing, or a myriad of other problems can occur. Some people even do it intentionally.   And sometimes, unfortunately, the bk court will dismiss your case.  

When this happens, your creditors usually take about 4 days to react to this, but it varies, wildly.  Creditors will generally find out as follows:

12:07 a.m. that night —- Some of your creditors who have ECF (electronic) access to the court will receive notice at 12:07 a.m.  I know this because my phone buzzes each morning at 12:07 a.m. to give me my court notices from that previous day.

4 days later — The bk court will dismiss your case.  Then, about 2 days later, they will mail out the Order Dismissing Case to all of your creditors.  Those creditors will probably receive the notice and open it 2 days later.  So, in most cases, they receive and open the written notice from the court in about 4 days.

2 weeks later — I have found that with large creditors, it seems to take up to two weeks for their collections or bankruptcy department to process the letter from the court advising that your case is dismissed.

What this means is that if your bankruptcy is dismissed, there is a good chance that your creditors will find out right away and re-start collections.  If you were behind on your car, they could come pick it up that night.  If there was a garnishment, they could re-start it with your next paycheck.  Unfortunately, it’s a crap-shoot.  They may not do anything for weeks, or they may react that night.

It is possible that you can re-open your case or file a new one, but that’s complicated enough that I won’t cover it here.  Good luck.

What is a release of garnishment, and how does it affect me?

It releases your garnishment!  

When a creditor sues you, they eventually get a judgment in court.  With this judgment, they can send a letter to your employer so that they can garnish your wages.

Here is a good blog entry on garnishment and timing:

But let’s say that you are currently being garnished, and they are hitting you for 25% of your paycheck.  A release of garnishment would stop any future garnishments.  However, I would not hold your breath on actually receiving a release of garnishment.

If you look at the picture, you will notice that I didn’t bother removing my breakfast orange.  It’s because the document really doesn’t say much.  It says that the creditor releases the garnishment (for now).  This means that payroll “does not need to withhold or remit funds at this time….”  The Release of Garnishment even cites Utah Rule of Civil Procedure 64(f)(2), but they really mean 64D.

The problem is that you’ll only see a release of garnishment if you file bankruptcy or pay off the judgment.  It’s a great court document to receive, but it’s pretty rare.

My car has too much equity and the chapter 7 trustee is selling it at auction. How long until I get my money from my car exemption?

Forever.  (Probably 3-4 months)

So my client had a truck that we knew had too much equity when we filed the case.  (Under Utah law, I can protect $3,000 of equity in one vehicle if your name is on title).  We decided to file the case, and we’d see how much excess equity the auctioneer would find.  If there was a tiny bit of equity, we could make payments to the trustee to keep it.  If there was too much equity, then we would give up the truck and pocket the $3,000 from the exemption.  

However, it took forever.  We turned over the vehicle in the first part of June, it won’t be sold until the August 25th auction, and my client should receive his $3,000 in September.  That means he goes almost 4 months without a vehicle waiting for that $3,000 to buy another one.

Here is the chain of email (with some helpful redactions) to show you the progression:


April 18, Trustee …

Robert, My search of NADA and KBB suggests the 2007 4×4 F150 has a $6,000 value. This suggests a $2,400 non-exempt equity after deducting 10% for costs and expenses of auction sale and $3,000 exemption. Can you show me valuation for $3,750? Perhaps Mr. X should take the truck to Erkelens and Olson for value? (801-355-6655)

April 18, BK Attorney (me) …

His truck is in fairly poor condition and the four-wheel drive is one of the systems that is not working. I’ll have him contact Erklens.

May 17, Trustee…


Thanks to Mr. X for taking the truck into E&O for value.

E&O values the truck at $7,500. After 10% for costs and expenses of sale, and the $3000 exemption, there is $3,750 of non-exempt equity. Does Mr. X want to buy this equity from the estate or deliver the truck to E&O for auction sale?

May 29, Bk Attorney…

Mr. X is prepared to turn over his truck to E&O for auction. He has asked me to see about the possibility of delaying turning it over until the last minute so that he can keep using it for work. Please let me know when he needs to turn it over and I will relay the message.

May 29, Trustee…
to me
Since he has decided not to keep it, he needs to turn it and the title over as soon as possible. In fact, he should be paying the estate for his use of the truck since petition. Depending on how this shakes out, I may argue that he is consuming his $3,000 exemption.

June 8, Trustee …

Can you confirm that Mr. X has delivered the truck to E&O?  If not, can you have him deliver the truck and then let us know when it is delivered.  We have a 727 deadline on June 18, so it would be nice to get that issue resolved before then.

June 8, Bk Attorney…

He advised me that he delivered it earlier this week.

July 17, BK Attorney…

Did his truck ever sale?  Debtor is asking when he’ll see his $3,000.

July 17, Trustee…

There was not enough time to get the truck in E&O’s June bankruptcy auction after it was delivered.  E&O’s next bankruptcy auction in October.  The trustee is trying to get it into an earlier auction.  I will keep you posted. 

July 17, Trustee …

E&O is going to auction the truck on August 25.  You should see the motion for approval to sell in the next day or two. Hopefully this help.

July 17, BK Attorney…

If it auctions on the 25th, how soon until he’ll see his $3,000 exempt proceeds?

July 17, Trustee…

Usually about two weeks or so.

Can I charge up my credit cards right before I go bankrupt?

Yes, but it’s a really bad idea.

Short Answer:  Your case could be dismissed for bad faith.  Or, that creditor may sue you for nondischargeability (meaning that you still have to pay that debt back plus attorney’s fees and interest).

Remember to avoid cash advances within 70 days of bk and charges of more than $500 in the 90 days before bk for luxury items.  

Long Answer:  It can hurt you.

I filed bankruptcy for a client last year who charged up over $10,000 in credit card charges on one card in the 2 months before we filed bankruptcy.  I didn’t know about it and had even asked him about recent purchases.  I am betting that he hoped that no one would notice.

It should have been a fairly simple case, but then I received the creditor’s lawsuit, called an adversary proceeding.  Officially, it was titled a “Complaint Seeking Exception to Discharge Pursuant to 11 USC s 532(a)(2)A) and/or 523(a)(2)(C) and/or 523 (a)(1) and/or 523 (a)(14A).”  A big, scary bankruptcy court lawsuit.  I have put in the code sections below.

Basically, my client had used his credit card to pay off about $1,500 in property taxes and spent the rest on lots of toys for his family.

I fought the lawsuit, and we settled for about $6,000, which is much, much better than it could have been.

Do NOT do the following:

Pay off taxes with your credit cards

Lie (fraud) on a credit application

Charge up more than $500 on a card within 90 days of filing bk  (this only applies to luxury items)

Take out cash advances of more than $750 within 70 days of filing bk.

Any of these items can lead a creditor to sue you in bankruptcy court.  You will most likely lose that suit and have to pay the monies back.



Here are some of those code sections (bolded):

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt
(1) for a tax or a customs duty—
(A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed;
(B) with respect to which a return, or equivalent report or notice, if required—
(i) was not filed or given; or
(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or
(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive; or
(i) for purposes of subparagraph (A)—
(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
(II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable; and
(ii) for purposes of this subparagraph—
(I) the terms “consumer”, “credit”, and “open end credit plan” have the same meanings as in section 103 of the Truth in Lending Act; and
(II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor;
(3) neither listed nor scheduled under section 521(a)(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit—
(A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; or
(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dis­chargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request;
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
(5) for a domestic support obligation;
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;
(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty—
(A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or
(B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition;
(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;
(9) for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance;
(10) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4), (5), (6), or (7) of this title, or under section 14c(1), (2), (3), (4), (6), or (7) of such Act;
(11) provided in any final judgment, unreviewable order, or consent order or decree entered in any court of the United States or of any State, issued by a Federal depository institutions regulatory agency, or contained in any settlement agreement entered into by the debtor, arising from any act of fraud or defalcation while acting in a fiduciary capacity committed with respect to any depository institution or insured credit union;
(12) for malicious or reckless failure to fulfill any commitment by the debtor to a Federal depository institutions regulatory agency to maintain the capital of an insured depository institution, except that this paragraph shall not extend any such commitment which would otherwise be terminated due to any act of such agency;
(13) for any payment of an order of restitution issued under title 18, United States Code;
(14) incurred to pay a tax to the United States that would be nondischargeable pursuant to paragraph (1);
(14A) incurred to pay a tax to a governmental unit, other than the United States, that would be nondischargeable under paragraph (1);

(14B) incurred to pay fines or penalties imposed under Federal election law;

(15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit;
(16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case;
(17) for a fee imposed on a prisoner by any court for the filing of a case, motion, complaint, or appeal, or for other costs and expenses assessed with respect to such filing, regardless of an assertion of poverty by the debtor under subsection (b) or (f)(2) of section 1915 of title 28 (or a similar non-Federal law), or the debtor’s status as a prisoner, as defined in section 1915(h) of title 28 (or a similar non-Federal law);
(18) owed to a pension, profit-sharing, stock bonus, or other plan established under section 401, 403, 408, 408A, 414, 457, or 501(c) of the Internal Revenue Code of 1986, under—
(A) a loan permitted under section 408(b)(1) of the Employee Retirement Income Security Act of 1974, or subject to section 72(p) of the Internal Revenue Code of 1986; or
(B) a loan from a thrift savings plan permitted under subchapter III of chapter 84 of title 5, that satisfies the requirements of section 8433(g) of such title;
but nothing in this paragraph may be construed to provide that any loan made under a governmental plan under section 414(d), or a contract or account under section 403(b), of the Internal Revenue Code of 1986 constitutes a claim or a debt under this title; or
(19) that—
(A) is for—
(i) the violation of any of the Federal securities laws (as that term is defined in section 3(a)(47) of the Securities Exchange Act of 1934), any of the State securities laws, or any regulation or order issued under such Federal or State securities laws; or
(ii) common law fraud, deceit, or manipulation in connection with the purchase or sale of any security; and
(B) results, before, on, or after the date on which the petition was filed, from—
(i) any judgment, order, consent order, or decree entered in any Federal or State judicial or administrative proceeding;
(ii) any settlement agreement entered into by the debtor; or
(iii) any court or administrative order for any damages, fine, penalty, citation, restitutionary payment, disgorgement payment, attorney fee, cost, or other payment owed by the debtor.

Here is a 4 year old blog post on the same topic:

Will bankruptcy wipe out my car loan and let me keep my car?


In bankruptcy, if you want to keep your financed vehicle, then you need to keep paying for it.  Bankruptcy will not wipe out (discharge) the loan amount and allow you to keep the vehicle free and clear.

Yesterday afternoon I received a call from a potential client who wanted to file bankruptcy on her $36,000 truck loan because the payments were over $600 a month.  I said that we could definitely do that.  She then asked when they would send her the title.  At that point, I realized that we had a problem with the concept of bankruptcy and secured debt.  

In most cases, bankruptcy (especially Chapter 7) will wipe out almost all of your debts, with the exception of certain priority debts like taxes, student loans, child support/alimony, and criminal restitution.  However, some people want to keep their secured debts.  A secured debt is a debt that you owe that is secured by a thing:  a mortgage is secured by a home, a car loan is secured by a car (plus they hold your title as a lienholder) , and your kirby vacuum is secured by a financing agreement filed with the state.

If you want to keep your thing secured by a secured debt, then you need to keep paying on that debt.  So if my potential client wants to keep her truck, then she needs to keep the $36,000 loan attached to it.  She cannot file a bk and then receive title to a $36,000 truck for free.  If she wants that title, then she needs to eventually pay off the secured loan.

To be clear, bankruptcy can wipe out your personal liability on those debts, but the secured debts are still attached to the stuff (collateral) you financed.  You cannot wipe out a secured debt and just walk away with a clean car title or even get rid of your entire mortgage.

What happens to my GreenSky/Mac Credit/Mac Tools account when I file bankruptcy?

It depends on what you want to happen.

If you want to keep the financed tools, then you keep them and keep paying on them.  If you want to surrender the tools and wipe out the debt, then you can give them back to Mac Tools.

When you file bankruptcy, there are certain debts that are secured, which means that they are attached to things.  A mortgage is secured by a house, a car loan is secured by your car, and if you are a high-end mechanic, then there’s a good chance that your giant rolling red tool box and vast assortment of tools hand-forged by Vulcan himself are secured by a loan through GreenSky (or Mac Credit).  

In a chapter 7, you file a statement of intention saying that you want to keep the tools.  Then you can reaffirm the debt by signing a reaffirmation agreement with GreenSky.  However, GreenSky is one of those creditors who really doesn’t care about the reaff.  They just want you to keep paying.  If you keep paying, you keep the tools.  If you stop paying, they’ll gladly pick them up.

In a chapter 13, we roll the financed tools into your chapter 13 plan payments over a 5 year plan.

So nothing will happen to your tools, so long as you keep paying GreenSky each month.

And in case you’re wondering, I’ve found them very pleasant to speak with on the phone (unlike the picture above).  Here is their contact information if you’re keeping your tools and making a payment:

How do I start my own IRA or 401k? Or how do I start saving money for retirement if I am self-employed or if my employer doesn’t have a 401k? (Acorns)

It’s tough.

First off, let me put this out there:  I am a bankruptcy attorney, not a financial advisor.  This is not legal advice, investment advice, and may not even be good advice.

Short answer:  there’s a new company called Acorns that lets you invest tiny amounts of money (like $1 increments) and even lets you start putting money into your own IRA.  Here is my link to join:

Long Answer:  A majority of my clients do not have any kind of retirement savings.  Some are self-employed with no large employer to cover them under a big institutional 401k, some are under-employed (which means that they have low-paying jobs that don’t offer much in the way of benefits), and some have been between jobs to the point that they drained out whatever retirement monies they had just to make ends meet.  

I am in the self-employed category.  Technically, I could hire an accountant, incorporate, and make some kind of complicated SEP 401k (self-employed 401k), but that’s really not my kind of law.  In other words, I don’t know how to do a 401k on my own.

Last month, one of my brighter children (I have 11, and they run the gamut from being brilliant to not-quite-so-brilliant) suggested that I look at something called Acorns at  Acorns lets you invest anywhere from $1 a month (and up).  Even better, you can set up something called “round-ups.” With round-ups, each time I buy a soda at the gas station, it will round up my gas station soda purchase to the nearest dollar and stick that into my investment account.

It is fairly simplistic, but it lets you start a retirement account today with less than 5 minutes of total hassle.

Apparently it’s the real deal and I haven’t been aware of it because I’m old and not very hip.  Here is a 2015 CNN article talking about it.

Now because of my son, I have an IRA.  It’s embarrassingly tiny, but it’s a beginning, and it was easy.

I don’t care if you use my link to join or do it on your own, but you really should consider setting up an account.  It’s a start.

Here’s my link for joining:



Do people ever read your bankruptcy blog? (100,000 views!!!)

I ask myself this question more than I actually hear it from clients, so I think it’s more of a crazy- person-talking-to-himself-internal-monologue kind of question.

So to answer that internal voice of debt, “Yes, apparently people do read this blog.”

The attached picture is not a good one, but it is a cell phone capture of my home computer. Last night I was wondering if the view count had hit 100,000.  Unfortunately, when I accessed the blog, I was visitor 100,001, so I missed that fantastic 100,000th reader.  I took this picture, sent it to my friends and family, and then walked around feeling pretty awesome for the rest of the evening.  To be honest, it’s a feeling of validation, knowing that people actually read the blog.

I posted my first entry in December 2013.  I’ll admit that I did it just to improve my rankings on google with raw organic content.  However, I soon found that if I wrote more detailed articles on more specific questions, then I could use them again and again.   For example, I get asked questions on mortgage reaffirmations every week, and now I can simply cut and paste a couple of links from my blog that hopefully make sense to my clients.

It’s also really fun to put the questions together.  I try to answer them in my speaking voice.  There are still spelling and grammatical errors, and I’m sorry.  Apparently my speaking voice throws those in as well.

As for the “artwork,” I love making the pictures for each topic.  I know that the pictures are not high quality;  I’ll even admit that I have no artistic training.  In my defense, I’m using Microsoft Paint, but even if I had a better program, the artwork would be the same.  Hopefully you can get the gist of the action in the scene.

So for everyone whose accessed this blog, thank you.  Every time someone searches for an answer on my blog and actually reads it, I feel great.