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:  https://acorns.com/invite/DGUTNN

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 www.acorns.com.  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 http://money.cnn.com/2015/04/15/technology/acorns-series-c/index.html 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:  https://acorns.com/invite/DGUTNN



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.

What are the median income figures for bankruptcy in Utah (April 2018)?

Basically, if you are over, then you are a chapter 13.  If you are under, then you are a chapter 7.    

Now remember that these numbers can be adjusted by child support payments (received or made), larger mortgages, huge tax debt, etc.  It is a gross overgeneralization to say that if you are over that figure then you MUST be a chapter 13, but this is the baseline we start with.  That being said, here are the current figures for Salt Lake County that we use on our Form 22C* (6 month average of current monthly income and disposable income):

Single:      $59,002

Married:    $64,832

Married with 1 child:   $76,066

Married with 2 children:  $83,537

Married with 3 children:  $91,937

Married with 4 children:  $100,337

(If you can’t see the pattern yet, each child we add bumps up your median income figure by $8,400).

As I said above, being over doesn’t necessary mean that you’ll be in a repayment plan (like a chapter 13), but this gives us a nice baseline.

*  (Notice that I called it “Form 22C” .  That is because I’m old.  The current form is called Form 122A Current Monthly Income and Means Test for Chapter 7 or Form 122B or 122C).

What happens if you are in a car accident before repossession (or have a damaged car that is repossessed)?

Generally, you wipe out the debt.

Every week or so I look at the “insights” on my blog to see what searches people run.  Here is today’s entry:  


If you look at the searches, you can see that somebody was on my blog today who apparently had a financed vehicle, damaged  in an accident, that was going to be or already was repossessed.  I’m assuming that they’re worried about being sued by the bank.  If they don’t file bankruptcy, that’s a real possibility.  If they do file bankruptcy, then they should be fine.

Basically, you can discharge that debt and turn over the vehicle, no matter what the condition.  Now you should have had it fully insured, and if you receive an insurance settlement, you may have to turn over those monies to the bank who financed your car.

However, if you let your insurance lapse, then there’s no insurance settlement coming.  In theory, the bank could sue you for the damage to the car, but that gets wiped out by the bankruptcy as well.

I wrote about this 3.5 years back.  It’s still relevant:

What happens after a repossession if my car is in bad shape with body damage?

How do I file my Utah State Individual Income Tax Return for previous years or past due returns (like 2008 when I never filed)?

I am not an accountant and I don’t do taxes!  So take this with a grain of salt.  This is just what one of my clients did recently with the Utah State Tax Commission (“USTC”).    

We are sitting in court at our 341 Meeting of Creditors, and the USTC representative says that they’ve never received a copy of my client’s 2008 TC-40, Utah Individual Income Tax Return.  My client is sure that she’s filed it, but the USTC wants a copy.

At this point, we can try to find the copy of the 9 year old tax return, or recreate it.  She can’t find it, so she’s stuck recreating it.  She can’t find her federal returns either, so it’s off to the internet.

Here are the basic steps:

  1.  First, she gets her federal transcript from the IRS.
  2. She gets a blank Utah tax return for previous years.
  3. She uses that transcript to fill out her 2008 Utah TC-40.
  4. She signs it in blue ink (just because blue is prettier), and
  5. I forward it to the USTC representative.  (If you don’t have an attorney, you can mail it to them).

And she’s done (and filed).

Here are the same steps substantially fleshed out.

  1.  How to get your transcript from the IRS.

There are two kinds of transcripts, a tax return transcript and/or a tax account transcript.

Here’s the difference, as defined by the IRS:

  • Tax Return Transcript – shows most line items including your adjusted gross income (AGI) from your original tax return (Form 1040, 1040A or 1040EZ) as filed, along with any forms and schedules. It doesn’t show changes made after you filed your original return. This transcript is only available for the current tax year and returns processed during the prior three years. A tax return transcript usually meets the needs of lending institutions offering mortgages and student loans. Note: the secondary spouse on a joint return must use Get Transcript Online or Form 4506-T to request this transcript type. When using Get Transcript by Mail or phone, the primary taxpayer on the return must make the request.
  • Tax Account Transcript – shows basic data such as return type, marital status, adjusted gross income, taxable income and all payment types. It also shows changes made after you filed your original return. This transcript is available for the current tax year and up to 10 prior years using Get Transcript Online or Form 4506-T. When using Get Transcript by Mail or phone, you’re limited to the current tax year and returns processed during the prior three years. Note: If you made estimated tax payments and/or applied an overpayment from a prior year return, you can request this transcript type a few weeks after the beginning of the calendar year to confirm your payments prior to filing your tax return.

Now that you know the difference, here is where you go to get the transcript emailed to you from the IRS.  https://www.irs.gov/individuals/get-transcript

2. How to get a blank Utah tax return for previous years.

You go here:  https://tax.utah.gov/forms-pubs/previousyears  

You click the drop down menu for what kind of return (individual), type in the year on the next drop down menu, and the form appears in .pdf, blank and ready for you to fill out.

The form we needed was located here:  https://tax.utah.gov/forms/2008/tc-40.pdf

3.  How to fill out our your blank TC-40.

Use your federal tax transcript.  It should show all of the numbers you need to plug in to the state form.  If it doesn’t, I’m at a loss, because I am not an accountant and I don’t do taxes.  (But don’t worry, it really does).

4.  Sign it in blue ink.

No, it doesn’t really matter.  But I love blue ink because it shows that this really is an original document.

5.  Send it to the tax commission.

If you are in bankruptcy, you can give it to your attorney, and he’ll email a scanned copy to the USTC.  Then it is magically filed.

If you are not in bankruptcy yet, then you’ll need to send it to the USTC directly.  You can do so here:  https://incometax.utah.gov/contact

Call them just to double-check.


What happens to my tools from Snap-On Credit when I file bankruptcy?

You lose them unless you keep paying for them.  

When we file a chapter 7 bankruptcy, you list secured items (like your home or car or tools) and then list the secured creditor.  If you want to keep the collateral, like the tools, then you check a box that says “reaffirm,” you keep making payments, and sign a reaffirmation agreement.  If you want to surrender the collateral, then you stop paying and turn it in.  http://robertspaynelaw.com/myutahbankruptcyblog/2014/03/27/do-i-have-to-reaffirm-my-car-loan-to-keep-my-car/

On the other hand, if you want to surrender the tools, then stop paying on them and eventually Snap-On (Snap-On Credit or Snap-On Financing) will contact you to pick them up.  Unlike the picture, they are rather friendly and easy to work with.

In a chapter 13, it’s a little different.  You make one monthly payment to the chapter 13 trustee to cover secured payments like car loans (and tools loans).  So stop making the payment directly and talk to your attorney about your chapter 13 repayment plan.

Now to make it  more complicated, let’s say that you have almost paid off the loan and have some tools with real value.  Then we get to apply exemptions (protections) if we can.  If you use the tools for work or for your business, then we can exempt them as “tools of the trade.”  http://robertspaynelaw.com/myutahbankruptcyblog/2014/01/25/will-i-lose-my-equipment-for-my-landscaping-business-if-i-file-for-bankruptcy/

So if you use it for work or business, I can protect it, up to $5,000 of value above and beyond the loan amount.  If you don’t use it for your work or business, then I cannot protect its value, and you may end up losing it anyways.