bankruptcy terms
How Do I File Bankruptcy and Keep My Car? A Step-by-Step Guide to Protecting Your Vehicle
How Do I File Bankruptcy and Keep My Car Legally? How do I file bankruptcy and keep my car is
October 6, 2025
How Do I File Bankruptcy and Keep My Car? A Step-by-Step Guide to Protecting Your Vehicle
How Do I File Bankruptcy and Keep My Car Legally?
How do I file bankruptcy and keep my car is one of the most common concerns people have when considering debt relief. Your car is often essential for getting to work, caring for your family, and maintaining stability. Fortunately, there are legal ways to keep your vehicle when filing for bankruptcy.
This article explains how to protect your car during bankruptcy, whether you file Chapter 7 or Chapter 13.
Options for Keeping Your Car in Chapter 7 Bankruptcy
Chapter 7 bankruptcy is designed to eliminate unsecured debt quickly, but it may involve selling certain assets. Still, many people keep their cars through exemptions or loan strategies.
Use Vehicle Exemptions
Each state provides exemption laws that protect a certain amount of vehicle equity. If your car’s equity (market value minus loan balance) falls within your state’s exemption limits, you can usually keep it.
For example:
- If your car is worth $6,000 and your exemption allows $7,500, your car is fully protected.
- If the equity is too high, the trustee might sell the vehicle unless you can pay the difference.
Reaffirmation Agreement
If you’re still paying on your car loan, you may be able to reaffirm the loan, which means you agree to continue making payments even after your other debts are discharged.
Reaffirmation is useful if:
- You’re current on your payments
- You want to keep the car under its existing loan terms
But be careful: if you default after reaffirmation, the lender can still repossess the car and hold you responsible for the balance.
Redeem the Vehicle
Redemption allows you to pay the current market value of your car in a lump sum, even if you owe more than it’s worth. For example, if your loan balance is $10,000 but the car is only worth $6,000, you can redeem it for $6,000 and wipe out the rest.
This option is ideal for over-financed vehicles, but you must be able to pay the lump sum quickly.
Keeping Your Car Through Chapter 13 Bankruptcy
If you’re behind on payments or don’t qualify for Chapter 7, Chapter 13 offers a repayment plan to catch up over time.
Repayment Plan Covers Missed Payments
One major benefit of Chapter 13 is the ability to catch up on late car payments through a 3–5 year court-approved repayment plan. This prevents repossession and helps you retain your car without needing a lump sum.
Cramdown Option
Chapter 13 may allow a cramdown on your auto loan. If your car is worth less than what you owe—and you purchased it more than 910 days before filing—you can reduce the loan balance to the car’s current value.
This significantly lowers your payment obligation while letting you keep your vehicle.
What to Know Before Filing Bankruptcy to Keep Your Car
Before you file, ask yourself:
- Is the car paid off, financed, or leased?
- What is the car’s current value versus the loan balance?
- Are you current on payments?
- Does your state exemption cover the equity?
Being strategic with timing, exemptions, and legal options can make the difference in keeping your vehicle. Working with a professional can help you choose the right approach based on your situation.
File Bankruptcy and Keep Your Car with the Right Plan
When asking, How do I file bankruptcy and keep my car, remember: both Chapter 7 and Chapter 13 offer different tools to help you. Whether it’s reaffirming a loan, claiming exemptions, or using a repayment plan, the right strategy depends on your car’s value, your loan status, and the type of bankruptcy you choose.
Understanding your rights and acting early increases your chances of keeping your vehicle while eliminating debt.
Get Help with How to File Bankruptcy and Keep Your Car
Need advice on how do I file bankruptcy and keep my car in your specific state? You’re not alone. At Bankruptcy Attorneys, we help people protect essential assets like their vehicles while getting the debt relief they need.
Start with a free evaluation and find out whether Chapter 7 or Chapter 13 is the best option for you.
Frequently Asked Questions (FAQs)
1. Can I keep my car if it’s paid off?
Yes, if the equity is within your state’s exemption limit.
2. What if my car is worth more than the exemption?
You may need to pay the difference or switch to Chapter 13 to protect it.
3. Can I keep a leased car in bankruptcy?
Yes, but you must continue making payments and formally assume the lease.
4. Will bankruptcy stop a pending repossession?
Yes. Filing automatically stops most collections, including repossession.
5. What if I want to surrender my car during bankruptcy?
You can voluntarily give up the vehicle and have the remaining debt discharged.
Key Takeaways
- You can keep your car in bankruptcy using exemptions, reaffirmation, or repayment plans
- Chapter 7 works best if you’re current and your equity is protected
- Chapter 13 helps if you’re behind on payments or need to restructure the loan
- Redemption and cramdown options lower what you owe on upside-down loans
- Legal guidance can help you file smart and protect your car and credit
Start Your Free Bankruptcy Evaluation