Bankruptcy & Vehicles

Can you keep your vehicle(s) if you file for bankruptcy?

You may keep a modest vehicle that you own out right. If you are a married couple filing jointly, you may each keep a modest vehicle.

What if your vehicle is financed? If you do not have much equity in your vehicle and you are current on the payments, you can keep the vehicle. However, if you are behind on the payments, the lender will attempt to get permission from the Bankruptcy Court to proceed with repossession.

Keep in mind that most of the time, it does not make sense to retain a vehicle with an expensive loan. A Chapter 7 bankruptcy is your opportunity to voluntarily surrender the vehicle and all responsibility for the loan. If you try to retain the vehicle (and sign a Reaffirmation Agreement) but fall behind on the payments later after your bankruptcy case is over, the vehicle could still be repossessed and you would be responsible for the balance of the loan (after the lender sells it for a fraction of what it is worth at an auction.) Thus, you could get stuck owing a big car debt and not have a vehicle to drive.

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