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Chapter 7 Bankruptcy

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How to File Bankruptcy and Keep Your Car: Legal Steps That Work

How to File Bankruptcy and Keep Your Car in the Process

Understanding how to file bankruptcy and keep your car is critical if you rely on your vehicle for work, family, or essential tasks. Thankfully, filing bankruptcy doesn’t always mean losing your car. With the right approach and legal strategy, you can protect your vehicle and still get debt relief.

In this guide, we’ll walk through how bankruptcy works, how to protect your car under Chapter 7 and Chapter 13, and what options you may have if your car loan is behind.

Bankruptcy Chapters and Vehicle Protection

When you’re figuring out how to file bankruptcy and keep your car, the first decision is which chapter to file under. The two most common consumer options are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

Chapter 7, also known as liquidation bankruptcy, allows you to eliminate unsecured debts quickly. However, you must meet income qualifications and may need to give up non-exempt property.

In most states, you’re allowed to protect a certain amount of vehicle equity under exemption laws. If your car’s equity falls below that limit, you can likely keep it. If it’s above the exemption, the trustee may sell the car to repay creditors—unless you take specific actions to protect it.

Chapter 13 Bankruptcy

Chapter 13, or the wage earner’s plan, is more flexible if you’re behind on car payments. This option allows you to restructure debt and catch up on missed payments over 3–5 years. In many cases, you can keep your car even if it’s not fully exempt, as long as it fits into your repayment plan.

If you want to explore more about how Chapter 13 works, consider reviewing how to file Chapter 13 bankruptcy.

Options to Keep Your Car in Bankruptcy

Even if your car has significant equity or you’re behind on your loan, there are still ways to retain it during the bankruptcy process.

Use State or Federal Exemptions

Each state offers a vehicle exemption amount that protects a portion of your car’s equity. Some states allow you to choose between federal and state exemptions, whichever protects more of your property.

Reaffirm the Car Loan (Chapter 7)

In a Chapter 7 case, you can “reaffirm” your car loan. This means you agree to continue making payments and keep the car. The court must approve the agreement, and you must show that you can afford the loan going forward.

Catch Up Through a Chapter 13 Plan

If you’re behind on payments but want to keep the car, Chapter 13 allows you to spread those missed payments over the life of your repayment plan. This avoids repossession and provides time to stabilize your finances.

Redeem the Car (Chapter 7)

Another option under Chapter 7 is redemption. This allows you to pay the lender the current value of the vehicle in a lump sum, even if you owe more on the loan. While harder to fund, it’s a way to keep the car and eliminate future payments.

Filing Bankruptcy Without Losing What Matters

The key to how to file bankruptcy and keep your car is understanding your rights and exemptions. Work with a bankruptcy attorney to evaluate your car’s value, the applicable exemptions in your state, and the best chapter for your situation. A skilled attorney can help you complete the forms correctly and ensure your vehicle remains protected.

Get Help with How to File Bankruptcy and Keep Your Car Today

If you’re worried about how to file bankruptcy and keep your car, you’re not alone. Legal professionals can help you choose the right chapter, apply exemptions, and navigate lender requirements. Start with a free evaluation from Bankruptcy Attorneys to protect your property and rebuild your financial future.

Frequently Asked Questions (FAQs)

Not always. If your equity is below the exemption limit or you reaffirm the loan, you can keep your vehicle.

Yes. Chapter 13 allows you to catch up on past-due payments and continue driving the car while making plan payments.

You may need to pay the difference, surrender the car, or file Chapter 13 to include the equity in your repayment plan.

Filing before a repossession gives you more options to protect your vehicle, especially with the automatic stay that halts collections.

Yes, although you may face higher interest rates. Many people finance a new vehicle within a year of discharge.

Key Takeaways

  • Filing Chapter 7 or 13 can help you keep your car with the right legal approach
  • State and federal exemptions protect vehicle equity in most cases
  • Reaffirmation and redemption are tools to retain financed vehicles under Chapter 7
  • Chapter 13 allows you to catch up on missed payments over time
  • Legal guidance is key to preserving your car and getting debt relief

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