Can I File Bankruptcy And Keep My Car Loan?

Bankruptcy is a legal process that allows individuals to eliminate or restructure their debt, but it can be a confusing and stressful experience. One common concern that arises is whether or not you can keep your car loan after filing…

Bankruptcy is a legal process that allows individuals to eliminate or restructure their debt, but it can be a confusing and stressful experience. One common concern that arises is whether or not you can keep your car loan after filing for bankruptcy. The answer is not always straightforward, but with the right information and guidance, you can make an informed decision about your car loan and bankruptcy. In this article, we will explore the options available for keeping your car loan during bankruptcy and what factors may impact your decision.

Can I File Bankruptcy and Keep My Car Loan?

Can I File Bankruptcy and Keep My Car Loan?

Filing for bankruptcy can be a difficult decision, and one of the biggest concerns for many people is whether they will be able to keep their car loan. Fortunately, in many cases, it is possible to keep your car loan even if you file for bankruptcy. Here’s what you need to know.

Chapter 7 Bankruptcy and Car Loans

If you are filing for Chapter 7 bankruptcy, also known as liquidation bankruptcy, you may be able to keep your car if you continue to make your car payments. However, if you have a lot of equity in your car, the bankruptcy trustee may decide to sell it to pay off some of your debts.

If you want to keep your car, you will need to reaffirm your car loan. This means that you will sign a new agreement with your lender stating that you will continue to make your car payments as agreed. It’s important to note that if you reaffirm your car loan, you will still be responsible for making your car payments even if your other debts are discharged through bankruptcy.

Chapter 13 Bankruptcy and Car Loans

If you are filing for Chapter 13 bankruptcy, also known as reorganization bankruptcy, you may be able to keep your car even if you have a lot of equity in it. In Chapter 13 bankruptcy, you will create a repayment plan to pay off your debts over a period of three to five years. As long as you continue to make your car payments, you should be able to keep your car.

It’s important to note that if you have a lot of equity in your car, you may need to pay some of that equity back to your creditors through your repayment plan. However, this is usually less than the full value of the car, and you will still be able to keep your car.

Benefits of Keeping Your Car Loan

There are several benefits to keeping your car loan even if you file for bankruptcy. First, having a car can make it easier to get to work and take care of your family. Second, if you continue to make your car payments, you will be able to rebuild your credit over time. Finally, if you reaffirm your car loan, you will have the peace of mind of knowing that you will not lose your car.

Bankruptcy vs. Surrendering Your Car

If you decide to surrender your car instead of reaffirming your car loan, you will no longer be responsible for making your car payments. However, you will also lose your car. If you need a car to get to work or take care of your family, surrendering your car may not be the best option.

If you are considering surrendering your car, you should also be aware that your lender may sell your car at auction and you may still owe money on your car loan. This is known as a deficiency balance, and you will be responsible for paying it back.

Conclusion

In conclusion, it is possible to keep your car loan even if you file for bankruptcy. If you are filing for Chapter 7 bankruptcy, you will need to reaffirm your car loan and continue to make your car payments. If you are filing for Chapter 13 bankruptcy, you will create a repayment plan to pay off your debts, including your car loan. There are several benefits to keeping your car loan, including the ability to rebuild your credit over time. If you are considering surrendering your car, you should be aware of the potential consequences, including a deficiency balance that you will be responsible for paying back.

Frequently Asked Questions

What is bankruptcy?

Bankruptcy is a legal process that allows individuals or businesses to eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. There are different types of bankruptcy, but the most common ones are Chapter 7 and Chapter 13.

What happens to my car loan if I file for bankruptcy?

If you file for bankruptcy, your car loan will be affected depending on the type of bankruptcy you file. In Chapter 7 bankruptcy, you may have to surrender your car if you have equity in it. In Chapter 13 bankruptcy, you can keep your car as long as you continue to make payments on it.

Can I keep my car if I file for Chapter 7 bankruptcy?

If you file for Chapter 7 bankruptcy, you may be able to keep your car if you have little or no equity in it. However, if you have equity in your car, the bankruptcy trustee may sell it to pay off your creditors. In some cases, you may be able to use exemptions to protect your car from being sold.

Can I keep my car if I file for Chapter 13 bankruptcy?

If you file for Chapter 13 bankruptcy, you can keep your car as long as you continue to make payments on it. In fact, one of the advantages of Chapter 13 bankruptcy is that you can catch up on missed car payments and even reduce the amount you owe on your car loan.

What happens to my car if I default on my car loan after filing for bankruptcy?

If you default on your car loan after filing for bankruptcy, the lender may repossess your car. However, if you filed for Chapter 13 bankruptcy, you may be able to stop the repossession by catching up on missed payments. If you filed for Chapter 7 bankruptcy, you may not be able to keep the car if you default on the loan.

Can you keep your Car when you file Bankruptcy?


In conclusion, filing for bankruptcy does not necessarily mean that you will lose your car. If you are able to continue making payments on your car loan, you may be able to keep your vehicle by reaffirming your debt with your lender.

However, it is important to keep in mind that the decision to file for bankruptcy should not be taken lightly. It can have serious long-term consequences on your credit score and financial standing.

Before making any decisions, it is recommended that you speak with a licensed bankruptcy attorney to discuss your options and determine the best course of action for your unique situation. With their guidance, you can make informed decisions about your finances and work towards a brighter future.

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