How to file bankruptcy and keep your car?

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Filing for bankruptcy can be a challenging and overwhelming process, but it doesn’t necessarily mean you have to give up your car. In this article, we will explore how you can file for bankruptcy and still keep your car. We will discuss the different types of bankruptcy, the impact on your car, and the steps you can take to protect your vehicle during the bankruptcy process.

Types of Bankruptcy

There are two common types of bankruptcy that individuals can file: Chapter 7 and Chapter 13. Each type has its own implications for your 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, there are exemptions that allow you to keep certain assets, including your car. The specific exemption amount varies by state, but it typically covers a reasonable value for a vehicle.

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. In this type of bankruptcy, you can usually keep your car as long as you continue making the agreed-upon payments.

Protecting Your Car during Bankruptcy

To protect your car during bankruptcy, you need to take certain steps and understand the rules and exemptions that apply. Here are some important considerations:

Exemptions: Familiarize yourself with the exemptions allowed in your state. These exemptions determine the value of your car that is protected from being sold to repay your debts. If the equity in your car is within the exemption limit, you can usually keep it.

Reaffirmation Agreement: If you have a car loan and want to keep your vehicle, you may need to sign a reaffirmation agreement with your lender. This agreement allows you to continue making payments on the loan and keep the car even after bankruptcy. However, it is crucial to carefully consider the financial implications of this decision, as you will still be responsible for the loan.

Redemption: Another option to keep your car during bankruptcy is redemption. This involves paying the fair market value of the car in a lump sum to the lender. While this can be a good option if your car is worth less than what you owe, it may require a significant amount of money upfront.

Exemption Planning: If you anticipate filing for bankruptcy in the future, it is essential to plan ahead. Transferring the title or selling your car before filing for bankruptcy can be seen as fraudulent behavior. Consult with a bankruptcy attorney to understand the best course of action to protect your assets.


Filing for bankruptcy doesn’t automatically mean you have to give up your car. By understanding the different types of bankruptcy, the exemptions available, and taking the necessary steps to protect your vehicle, you can navigate the bankruptcy process while keeping your car. It is important to consult with a bankruptcy attorney to ensure you are following the appropriate legal procedures and making informed decisions.


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