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Can You File Bankruptcy and Keep Your Car? What You Need to Know Before Filing
Can You File Bankruptcy and Keep Your Car Without Losing It? Can you file bankruptcy and keep your car? The
September 29, 2025
Can You File Bankruptcy and Keep Your Car? What You Need to Know Before Filing
Can You File Bankruptcy and Keep Your Car Without Losing It?
Can you file bankruptcy and keep your car? The answer depends on your car’s value, your loan status, and whether you file Chapter 7 or Chapter 13. For many people, their vehicle is essential to everyday life. Losing it could make it harder to get to work, care for family, or attend court hearings.
Thankfully, bankruptcy laws include protections that may allow you to keep your car while managing or eliminating other debts.
What Happens to Your Car in Chapter 7 vs. Chapter 13
Understanding your bankruptcy options is key to answering “can you file bankruptcy and keep your car.” The two most common types of consumer bankruptcy—Chapter 7 and Chapter 13—handle vehicle ownership differently.
Chapter 7 Bankruptcy
In Chapter 7, also known as liquidation bankruptcy:
- Your non-exempt assets may be sold to pay creditors.
- If your car’s equity is under the exemption limit, you can usually keep it.
- You must stay current on loan payments if the car is financed.
If your equity exceeds the exemption limit, the bankruptcy trustee may sell the car, pay you the exemption amount, and use the rest to repay creditors. However, some filers are able to keep their car in Chapter 7 by reaffirming the loan or redeeming the vehicle.
Chapter 13 Bankruptcy
In Chapter 13, you create a 3- to 5-year repayment plan to pay debts over time. It offers more flexibility:
- You can catch up on missed car payments through the plan.
- If your loan is upside-down, you may be able to cram down the balance to the car’s value.
- You can protect non-exempt equity while keeping the vehicle.
Chapter 13 may be an option for individuals who are behind on car payments or have higher-value vehicles.
Vehicle Exemptions: Protecting Your Car’s Equity
Every state offers vehicle exemptions, which protect a certain amount of car equity in bankruptcy. For example:
- Federal exemption: About $4,450 (as of 2025)
- California: Multiple exemption systems, with different vehicle protections
- Texas: Unlimited exemption for one motor vehicle per household member
How to Calculate Your Car’s Equity
- Determine your car’s current market value.
- Subtract your loan balance (if any).
- The result is your equity.
If your equity is less than or equal to the allowed exemption, your car is protected. If it’s higher, Chapter 13 may still allow you to keep the car by repaying the non-exempt portion.
Can You File Bankruptcy and Keep Your Car with a Loan?
If you’re financing your car, there may be options available to address the vehicle loan during bankruptcy:
Reaffirm the Loan (Chapter 7)
You agree to keep making payments, and the lender agrees not to repossess the car. This keeps the loan active after bankruptcy.
Redeem the Car (Chapter 7)
You pay the car’s current value in a lump sum—ideal if the loan balance is much higher than the car’s worth.
Repay in the Plan (Chapter 13)
Your car loan is rolled into the Chapter 13 plan, and you address the loan through the repayment plan, depending on eligibility and court approval.
Can You File Bankruptcy and Keep Your Car? What to Consider
So, can you file bankruptcy and keep your car? In some situations, it may be possible. The outcome depends on your car’s value, your exemption limits, and the bankruptcy chapter you choose. The outcome depends on several factors, including exemption limits and the type of bankruptcy filed.
Get Help with How to File Bankruptcy and Keep Your Car
Still asking can you file bankruptcy and keep your car? The legal team at Bankruptcy Attorneys can provide information about the bankruptcy process and discuss available options. You may request a free evaluation to review your situation before filing.
Frequently Asked Questions (FAQs)
1. What if my car is worth more than the exemption?
In Chapter 7, the trustee may sell the car. In Chapter 13, you may repay the non-exempt equity over time and keep it.
2. Can I keep a leased vehicle in bankruptcy?
Yes, if you stay current on lease payments or assume the lease as part of your plan.
3. Will bankruptcy stop my car from being repossessed?
Yes. The automatic stay stops repossession efforts immediately after filing.
4. Can I buy another car during bankruptcy?
Possibly, especially in Chapter 13, but you’ll need court approval and the lender must agree.
5. Do I have to be current on car payments to keep it?
In Chapter 7, yes. In Chapter 13, you can catch up on past-due payments over time.
Key Takeaways
- Most people can keep their car during bankruptcy if equity is protected.
- Chapter 7 requires you to be current on car payments.
- Chapter 13 allows repayment of missed payments and can reduce loan amounts.
- State and federal vehicle exemptions determine how much equity you can protect.
- Legal support improves your chances of keeping your car through bankruptcy.
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