How to file bankruptcy and keep my car?

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Filing for bankruptcy can be a challenging and overwhelming process, but it doesn’t necessarily mean you have to lose your car. If you’re wondering how to file bankruptcy and keep your car, this article will guide you through the necessary steps and provide some helpful tips to protect your vehicle during the bankruptcy process.

Understanding Bankruptcy and Car Ownership

Before diving into the specifics of keeping your car during bankruptcy, it’s important to understand the different types of bankruptcy and how they may affect car ownership.

Chapter 7 Bankruptcy: In Chapter 7 bankruptcy, also known as liquidation bankruptcy, your non-exempt assets may be sold to repay your debts. However, certain exemptions, including exemptions for vehicles, can help you retain ownership of your car.

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

Exemptions and Car Equity

When filing for bankruptcy, it’s essential to determine the equity you have in your car. Equity refers to the value of your car minus any outstanding loans or liens. The amount of equity you have in your car will determine how it is treated during bankruptcy.

Exemptions: Each state has its own set of exemptions that determine what property you can keep during bankruptcy. These exemptions typically include a specific dollar amount or percentage of equity that you can protect. It’s crucial to consult your state’s bankruptcy laws or seek legal advice to understand the exemptions available to you.

Car Equity and Chapter 7 Bankruptcy: In Chapter 7 bankruptcy, if your car’s equity is fully covered by the available exemptions, you can keep your car. However, if your car’s equity exceeds the available exemptions, the bankruptcy trustee may sell your car to repay your creditors. To protect your car, you may be able to use a wildcard exemption or negotiate a reaffirmation agreement with your lender.

Car Equity and Chapter 13 Bankruptcy: In Chapter 13 bankruptcy, you can keep your car even if its equity exceeds the available exemptions. However, you’ll need to include the value of the non-exempt equity in your repayment plan. This means that you’ll need to repay the equivalent value of the non-exempt equity over the course of your repayment plan.

Reaffirmation Agreements

A reaffirmation agreement is a legal contract between you and your lender that allows you to keep your car and continue making payments on the loan. By signing this agreement, you agree to remain personally liable for the car loan, even if your other debts are discharged in bankruptcy.

Reaffirmation agreements must be approved by the bankruptcy court to ensure they are in your best interest. It’s important to carefully consider the terms of the agreement and consult with an attorney before signing.

Consulting with an Attorney

Navigating the bankruptcy process can be complex, especially when it comes to protecting your car. It’s highly recommended to consult with an experienced bankruptcy attorney who can guide you through the process, help you understand your rights, and ensure you make informed decisions.

An attorney can assess your specific situation, determine the best course of action, and assist you in maximizing the exemptions available to you. They can also help negotiate reaffirmation agreements and represent your interests in court if necessary.


Filing for bankruptcy doesn’t automatically mean losing your car. By understanding the different types of bankruptcy, exemptions, and reaffirmation agreements, you can take the necessary steps to protect your vehicle during the bankruptcy process. It’s crucial to consult with an attorney to ensure you navigate the process correctly and make the best decisions for your financial situation.


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