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.
Overview Articles
Overview Articles
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Your Car in Chapter 7 Bankruptcy
People often wonder how Chapter 7 bankruptcy will affect their ability to keep their car. Suppose you aren't making payments on a vehicle. In that case, you'll keep it if its value is below your state's vehicle exemption amount—the amount of equity you can protect in a vehicle when you file for Chapter 7 bankruptcy. However, if you make car payments, it's not so simple. You’ll decide whether to surrender the car or keep it and continue to make payments. We explain how to tell your creditors whether you want to keep a leased or financed car in Chapter 7 bankruptcy or surrender it to the lender.
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If You Are Behind in Your Car Payments, Can Chapter 7 Help?
Chapter 7 bankruptcy itself does not provide a way to catch up on overdue car payments.
Car Leases in Chapter 7 Bankruptcy
Car Leases in Chapter 7 Bankruptcy
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What Happens to a Car Lease in Chapter 7 Bankruptcy?
If you are leasing a car, truck, van, or another motor vehicle when you file for Chapter 7 bankruptcy, you have two options for the car lease: You can assume the car lease (continue with it) or reject the car lease (terminate it). The car lease option determines whether you keep the car and remain liable for lease payments, excess mileage, or other penalties after Chapter 7 bankruptcy.
Options to Keep or Surrender Your Car in Chapter 7
Options to Keep or Surrender Your Car in Chapter 7
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Reaffirming a Car Loan in Chapter 7 Bankruptcy
When you reaffirm a debt, you agree to be responsible for the debt as if you had not filed for bankruptcy. You can keep your car as long as you keep making the payments. However, if you default on the payments, the lender can repossess it and sell it at auction. You’ll be responsible for any remaining balance due under the loan agreement, called a “deficiency balance,” and sales costs.
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Can I Keep Two Cars in Chapter 7 Bankruptcy?
Whether you can keep two cars in Chapter 7 bankruptcy depends on a number of factors. Learn more here.
Motor Vehicle Exemptions by State
Motor Vehicle Exemptions by State
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The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
The motor vehicle exemption helps you keep your car, truck, motorcycle, or van in Chapter 7 bankruptcy by protecting equity in a vehicle.
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Car Repossession Laws: An Overview
Learn about car repossessions: how they work, how to avoid them, and your options if it happens to your car.
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My Car Was Repossessed. Can Chapter 7 Help?
If your car has been repossessed, filing for Chapter 7 bankruptcy may allow you more time to negotiate with your lender and get your car back.
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Can the Lender Repossess My Car During Chapter 7 Bankruptcy?
If your car loan lender gets court permission, it can repossess your car during Chapter 7 bankruptcy. Find out how to avoid losing your car in Chapter 7 bankruptcy.