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Can I keep my car if I file for bankruptcy?

When you fall behind on your payments and your finances start to crumble, you may think about filing for bankruptcy.

Declaring bankruptcy is an effective way to wipe out or create affordable payment plans for the following:

  • Credit card debt
  • Outstanding medical bills
  • Personal loans

However, you may have concerns about losing your car if you file for bankruptcy. Here are some general guidelines for keeping your vehicle even when you declare bankruptcy.

If you own your car

Chapter 7 bankruptcy is not designed to take all your property. You can keep certain types of properties so you can continue to go to work and live your life. Bankruptcy laws allow you to make your vehicle exempt. However, this only applies if you own your vehicle outright. If you have a car loan, things can get a little more complex.

Reaffirming your loan

If you have a car loan and wish to continue it, you may be able to sign a reaffirmation agreement. By signing this document, you reaffirm your liability on the loan. This is necessary because bankruptcy may technically wipe out your liability.

Consider a repayment plan

Sometimes, it can be difficult to protect your car with a Chapter 7 case, especially if you are behind on your car payments. If your lawyer tells you that you are not able to safeguard your vehicle, you may need to file for a Chapter 13 bankruptcy instead. Chapter 13 differs from Chapter 7 in that it gives you a repayment plan for your debts instead of wiping them out. This can be a great way to pay your car loan back. A chapter 13 case will give you three to five years to pay off your vehicle with a new plan. 

The short answer is that you will likely be able to save your vehicle when you file for bankruptcy, but you should always get legal advice about your unique case.

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We help people file for bankruptcy relief under the Bankruptcy Code.