Can I Keep My Car If I File Bankruptcy?
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Can I Keep My Car If I File Bankruptcy?

If you’re considering filing bankruptcy, one concern for many people is what will happen to their car when they file. Fortunately, bankruptcy offers filers many options to protect their cars, clear debt related to car loans and keep living their life.

If you do wish to keep your car, both Chapter 7 and Chapter 13 bankruptcy may offer ways for you to keep your car during and after filing.

Figuring out which protections are available for your car is a matter of local bankruptcy law. For this reason, you may wish to consult with a bankruptcy attorney. Fill out the following form to get in touch with a nearby bankruptcy lawyer who can answer your questions about filing bankruptcy.


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Cars Under Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common type of personal bankruptcy. With it, you may be able to quickly clear debts tied to credit cards and medical bills without paying them back.

If you own your car outright, you may be able to list your automobile as an exemption, especially if you use it to get to work. Each state has different bankruptcy exemptions laws that outline the types of property that can be protected during your case. However, bankruptcy laws differ by state, so you may wish to research how exemptions apply to you.

If you’re currently making payments on a car, there are a couple options available which may allow you to keep it.

  • Loan reaffirmation: You can file a reaffirmation agreement with your car creditor, which states that you will pay the balance of what you owe on the car regardless of any bankruptcy filing. This will exclude your car payments from debts dismissed in bankruptcy, so you can think of this as a way of removing your car from bankruptcy proceedings. It’s worth noting that you will have to continue making payments until the car is paid off.
  • Redemption: Under Chapter 7, you may also have the option to purchase your car from the creditor for its current market value if you owe more than what the car is worth. This could be a good option if your car’s loans cost more than the car itself is worth, though coming up with the payment may be difficult.

If you’ve currently got a car under lease, you have the option to continue with the lease or surrender the car to the creditor. If the car is surrendered, any money still owed under the lease will typically be eliminated in a Chapter 7 bankruptcy case.

Also, keep in mind that completing Chapter 7 may make it easier to make your car payment obligations. While you may not be able to directly address your car loan debt with this type of bankruptcy you may clear other debts. In turn, this may make it easier to pay your other bills.

Car Loans In Chapter 13 Bankruptcy

If you’re filing Chapter 13 bankruptcy, you may use your case to directly address any debt you have on car loans. Chapter 13 typically has the strongest bankruptcy protections for many types of property.

Depending on how long ago you purchased your car, you may be able to limit what you owe to the car’s current market value. If that’s not a possibility, you may still be able to significantly lower the interest rate on your car loan.

Whatever your situation, you may have multiple options regarding what to do with your car in bankruptcy. Every individual case differs, though, so you may wish to speak with a bankruptcy lawyer to get answers to your specific questions. Get a free case evaluation with a bankruptcy lawyer near you by completing the form on this page.


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