Most of us rely on our vehicles as our main form of transportation to work, school, and other obligations. This is especially true of those of us living in Southern California. For this reason, we receive a lot of questions about if it is possible to keep a vehicle when filing for bankruptcy.

We have already discussed the best way to keep your car after a completed bankruptcy, but what about during the bankruptcy process?

The short answer is that how you can keep your vehicle during bankruptcy will largely depend under which chapter of bankruptcy you file and what state you live in. These factors will influence what you can claim as exempt.

Chapter 7

In a Chapter 7 Bankruptcy, many your debts are discharged (dismissed). The bankruptcy trustee will sell off your non-exempt assets and use that money to pay your creditors. Determining if you can keep your car will depend on if your car equity is exempt and if you are behind on your payments.

Reaffirming Your Car Loan

Your lender may ask you to sign a reaffirmation agreement and continue making your regular payments. If you are not familiar with reaffirmation agreements, please click here for more information.

It is important to note that if you sign a reaffirmation agreement and stop making payments, you run the risk of having your car repossessed. Make sure that you weigh all options with your attorney before signing a reaffirmation agreement.

Chapter 13

In a Chapter 13 Bankruptcy, you will work with your attorney, the court, and your creditors to come up with a repayment plan. The amount of time this will take can range from three to five years. This can be complicated, but your attorney will guide you through the process.

Generally, you will continue to make your car payments. Even if your car loan is in arrears, you will be able to make up the payments through your plan payments. So, if you consistently make your monthly plan payments, you will be able to keep your vehicle.

Need more information?

Please contact our office today for a consultation. We would love to meet with you to provide you with options suited to your unique situation.