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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
September 16, 2025
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. In some situations, it may be possible to keep your vehicle, depending on the circumstances.
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, keeping the car may be possible. 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 is generally more flexible than Chapter 7 and may allow you to address missed payments, address repossession concerns through the court process, or restructure certain loan terms in limited situations.
In some cases, filing under Chapter 13 may allow individuals to keep a vehicle while addressing payment issues.
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 review each case based on the applicable law and individual facts.
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? Speaking with a professional may help you better understand your options and how the law applies to your situation.
Visit us today to schedule a free case evaluation and get answers tailored to your car, debt, and state laws.
Frequently Asked Questions (FAQs)
1. Can I keep my car if I own it outright?
If your equity is below your state’s exemption limit, keeping the car may be possible, depending on the circumstances.
2. Can I keep my car if I’m still paying on the loan?
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.
3. What happens if my car is worth more than the exemption?
The trustee may sell the car in Chapter 7. In Chapter 13, you can keep it by paying the non-exempt equity over time.
4. Will bankruptcy stop a car repossession?
Yes. The automatic stay stops repossession immediately. Chapter 13 can also help you catch up on missed payments.
5. Should I give up a car I can’t afford?
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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