Chapter 7 Bankruptcy and Your Car

Many people filing for Chapter 7 bankruptcy want to know what will happen to their car. Cars are often important to get to work or school and to take care of other important tasks, like buying food. The good news is that most people filing for Chapter 7 bankruptcy are able to keep a modest car.

Whether you can keep your car in Chapter 7 depends on whether you are behind on your car payments (unlike Chapter 13, Chapter 7 doesn't allow you to make up arrears through the bankruptcy), the amount of your car loan (if any), and any available exemptions you can apply to that loan.

You can also keep your car by using one of the bankruptcy options for handling secured debt -- redeeming the car or reaffirming the loan.  Or, if you don't want to keep your car,  you can surrender it in the bankruptcy.  

If you lease your car, your options are different -- you can continue with the lease by assuming it in the bankruptcy, or you can terminate the lease by rejecting it.