How to file bankruptcy and keep my car?

How to file bankruptcy and keep my car?

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Filing for bankruptcy can be a challenging and overwhelming process, but it is sometimes necessary to regain control of your financial situation. One common concern for individuals considering bankruptcy is how it will impact their assets, particularly their car. In this article, we will explore the steps you can take to file bankruptcy while keeping your car.

Understanding the Different Types of Bankruptcy

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

Chapter 7 Bankruptcy: This type of bankruptcy involves the liquidation of assets to repay creditors. However, certain exemptions may allow you to keep your car, depending on the equity you have in it.

Chapter 13 Bankruptcy: In Chapter 13 bankruptcy, you create a repayment plan to pay off your debts over a period of three to five years. This type of bankruptcy may allow you to keep your car while making regular payments.

Exemptions and Equity

When filing for bankruptcy, exemptions play a crucial role in determining what assets you can keep. Each state has its own set of exemptions, which outline the value of assets you can protect from liquidation. These exemptions typically include a specific amount of equity in your car.

Equity refers to the value of your car minus any outstanding loans or liens. For example, if your car is worth $15,000, and you still owe $10,000 on your auto loan, your equity is $5,000.

If the equity in your car falls within the exemption limits set by your state, you can typically keep your car during bankruptcy. However, if your equity exceeds the exemption amount, the bankruptcy trustee may require you to either surrender the car or pay the excess amount to your creditors.

Reaffirmation Agreement

If you have a car loan and want to keep your vehicle during bankruptcy, you may need to enter into a reaffirmation agreement with your lender. This agreement allows you to continue making payments on your car loan and retain ownership of the vehicle.

By signing a reaffirmation agreement, you are essentially excluding the car loan from the bankruptcy discharge. This means that even though your other debts may be discharged, you will still be responsible for repaying the car loan as agreed.

It’s important to carefully consider the decision to sign a reaffirmation agreement. Consult with your bankruptcy attorney to evaluate your financial situation and determine if reaffirming the car loan is in your best interest.

Consulting with a Bankruptcy Attorney

Navigating the complexities of bankruptcy can be challenging, especially when it comes to protecting your assets like your car. It is highly recommended to consult with a qualified bankruptcy attorney who can guide you through the process and help you make informed decisions.

A bankruptcy attorney will assess your specific circumstances, review your exemptions, and advise you on the best course of action to keep your car during bankruptcy. They will also assist you in preparing the necessary documentation and represent your interests throughout the bankruptcy proceedings.


Filing for bankruptcy does not necessarily mean you will lose your car. By understanding the different types of bankruptcy, exemptions, equity, and reaffirmation agreements, you can take the necessary steps to keep your car while seeking debt relief. Remember to consult with a bankruptcy attorney who can provide personalized guidance based on your unique circumstances.


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