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Chapter 7 Bankruptcy

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Can You Keep Your Car If You File Bankruptcy?

Can You Keep Your Car If You File Bankruptcy or Will It Be Taken?

Can you keep your car if you file bankruptcy is one of the most common concerns people have before taking the next step toward debt relief. For many, a car is not just transportation—it’s a necessity for work, family, and daily life. The good news is: in many cases, you can keep your vehicle.

In this article, we explain when and how you can protect your car in both Chapter 7 and Chapter 13 bankruptcy filings.

Chapter 7 vs. Chapter 13: How Car Ownership Is Treated

Your ability to keep your car depends largely on the type of bankruptcy you file and how much equity you have in the vehicle.

Chapter 7 Bankruptcy

Chapter 7 is known as liquidation bankruptcy, where non-exempt assets may be sold to pay creditors. Whether you can keep your car under Chapter 7 depends on:

  • The car’s equity (value minus loan balance)
  • Your state’s vehicle exemption limit
  • Whether you’re current on payments

If your equity is within the exemption limit and you’re making timely payments, you can usually keep your car. If you’re behind, the lender may still repossess it—even with a bankruptcy filing.

Chapter 13 Bankruptcy

Chapter 13 involves a repayment plan that spans 3–5 years. It’s often more flexible than Chapter 7 and can help you:

  • Catch up on missed payments
  • Avoid repossession through court protection
  • Reduce your car loan in some cases (via a “cramdown”)

So yes, you can keep your car if you file bankruptcy under Chapter 13, even if you’re behind on payments.

Key Factors That Determine Car Retention

When asking can you keep your car if you file bankruptcy, consider these major factors:

Vehicle Equity

The amount of equity you have plays a major role. If your equity exceeds your state’s exemption, the bankruptcy trustee may sell the car to repay creditors. But if you’re below the limit, it’s generally protected.

Loan Status

Are you current on your car loan? In Chapter 7, falling behind increases the risk of repossession. In Chapter 13, you may include the loan in your repayment plan and avoid immediate loss.

Exemption Laws

Each state has laws about how much vehicle value is protected in bankruptcy. Some states allow only a few thousand dollars in exemption, while others offer broader protections.

Intent to Reaffirm or Redeem

In Chapter 7, you may choose to:

  • Reaffirm the loan (agree to continue paying)
  • Redeem the vehicle (pay the value in full)
  • Surrender the car (give it up and discharge the debt)

Bankruptcy Doesn’t Always Mean Losing Your Car

Many people are surprised to learn that bankruptcy is designed to help, not punish. If your car is essential to your job, household, or medical needs, courts and trustees are often willing to work with you.

The question can you keep your car if you file bankruptcy is best answered by reviewing your equity, loan status, and bankruptcy chapter with a legal professional.

Get Help Understanding If You Can Keep Your Car in Bankruptcy

Still unsure can you keep your car if you file bankruptcy? Don’t risk losing a critical asset. Let an experienced professional help you navigate your rights and protections under the law.

Visit us today to schedule a free case evaluation and get answers tailored to your car, debt, and state laws.

Frequently Asked Questions (FAQs)

Yes—if your equity is below your state’s exemption limit, you can typically keep the car.

Yes, if you’re current or include the loan in a Chapter 13 repayment plan. In Chapter 7, you may need to reaffirm the loan.

The trustee may sell the car in Chapter 7. In Chapter 13, you can keep it by paying the non-exempt equity over time.

Yes. The automatic stay stops repossession immediately. Chapter 13 can also help you catch up on missed payments.

If the car payment is unaffordable, surrendering it in bankruptcy may be a smart way to discharge the debt and reset.

Key Takeaways

  • You can often keep your car in bankruptcy, depending on equity and loan status
  • Chapter 13 allows more flexibility to repay or catch up on car loans
  • Chapter 7 requires careful attention to exemptions and payment status
  • Reaffirmation or redemption options may apply in Chapter 7 cases
  • A bankruptcy attorney can guide you through the best way to protect your vehicle

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