How can i file bankruptcy and keep my car?

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If you find yourself in a situation where you need to file for bankruptcy but want to keep your car, there are options available to you. Filing for bankruptcy can be a challenging process, but with the right knowledge and guidance, you can navigate it successfully while still retaining ownership of your vehicle. In this article, we will explore the steps you can take to file bankruptcy and keep your car.

Understanding Bankruptcy and its Impact on Assets

Before delving into the specifics of keeping your car during bankruptcy, it’s essential to understand the different types of bankruptcy and how they impact your assets. The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy: In Chapter 7 bankruptcy, also known as liquidation bankruptcy, your non-exempt assets may be sold to repay your debts. However, each state has its exemptions, including exemptions for vehicles. If your car’s value falls within the exemption limit, you can keep it by reaffirming the debt or redeeming the car.

Chapter 13 Bankruptcy: Chapter 13 bankruptcy involves creating a repayment plan to pay off your debts over a specified period, usually three to five years. This type of bankruptcy allows you to keep your assets, including your car, as long as you continue making payments according to the plan.

Reaffirming the Debt

One option to keep your car during Chapter 7 bankruptcy is to reaffirm the debt. Reaffirmation means that you agree to continue making payments on your car loan, despite filing for bankruptcy. By reaffirming the debt, you essentially exclude the car loan from the bankruptcy discharge, allowing you to keep the vehicle.

It’s important to note that reaffirming the debt means you will still be responsible for the loan even after bankruptcy. If you fail to make payments in the future, the lender can repossess the car and hold you liable for any remaining debt.

Redeeming the Car

Another option available during Chapter 7 bankruptcy is redeeming the car. Redemption involves paying the lender the current fair market value of the vehicle in a lump sum. This amount is usually lower than the outstanding loan balance.

While redeeming the car requires a significant upfront payment, it allows you to keep the vehicle without the burden of the original loan. There are specialized lenders who offer redemption loans to individuals going through bankruptcy, making it possible to finance the redemption amount if you don’t have the funds available.

Chapter 13 Bankruptcy and Car Payments

If you opt for Chapter 13 bankruptcy, you can include your car loan in the repayment plan. This allows you to keep your car while catching up on missed payments or reducing the interest rate on the loan. The repayment plan will be based on your income and expenses, ensuring that you can afford the monthly payments.

It’s crucial to make all the payments according to the plan to retain ownership of your car. Failure to comply with the repayment plan could result in the lender seeking permission from the court to repossess the vehicle.


Filing for bankruptcy doesn’t necessarily mean losing your car. Whether you choose Chapter 7 or Chapter 13 bankruptcy, there are options available to help you keep your vehicle. Reaffirming the debt or redeeming the car are viable solutions during Chapter 7 bankruptcy, while Chapter 13 bankruptcy allows you to include the car loan in a repayment plan. Consulting with a bankruptcy attorney is crucial to understanding the specific laws and regulations in your state and making informed decisions.


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