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Can I Keep My Car During a Bankruptcy?

Bankruptcy is a big decision and, for many, it is necessary to begin a fresh start and hit the reset button on their finances. When filing for bankruptcy, there are generally two types individuals can choose from – Chapter 7 and Chapter 13. While a Chapter 7 bankruptcy typically liquidates most of a person’s assets, a Chapter 13 bankruptcy allows debtors to repay what they owe for the next 3 to 5 years. However, what happens to your car with either of these chapters will depend on the amount of equity you have in it.

Keeping Your Car During a Bankruptcy

Depending on your circumstances, you may be able to keep your car as you go through the bankruptcy process. Because your car is considered a valuable asset, creditors will find it very appealing and pursue it to collect the debt you owe. If it can be counted under an exemption, however, you may be able to protect it from repossession.

Here are the factors used to determine if you can keep your vehicle:

  • The chapter of bankruptcy you are filing
  • The value of the car
  • If you are leasing, own, or financing the car
  • The exemptions that may apply where you live

When filing for a Chapter 7 bankruptcy, if local bankruptcy laws exempt the equity you have in your car and you are current and remain current on your loan payments after filing, you can usually keep it. If the market value of a car you own is less than the exemption amount, you are also in the clear and can keep it.

On the other hand, if you are filing for a Chapter 13 bankruptcy, you do not have to be up to date on your car payments if you want to keep it. With this option, you can catch up on your loan through a repayment plan, though you will have to show that you have enough income to do so. If you own your car, however, you can keep it without worrying about it being sold off to pay your creditors.

Schedule a Consultation with a Skilled Bankruptcy Attorney to Discuss Your Case Today!

Regardless of the chapter of bankruptcy you are filing for, the legal team at Haven Law Group, P.C. can guide you through every step of the process and provide the advice you need to help you keep certain important assets. With more than 25 years of combined experience on our side, you can feel confident in choosing to work with us.

Reach out to our law office today at (757) 209-2167 to set up a free consultation.