Can Filing Bankruptcy Save My Car?

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Many people’s first question when considering bankruptcy is, “can filing bankruptcy save my car?” It is very possible to save your car from repossession. There are a number of protections and exemptions that may be available to you.

The first thing that happens when you file for bankruptcy is that creditors and collectors are immediately prohibited from harassing you for payments. This is called an “automatic stay.” The stay prevents any lender from repossessing the vehicle, unless they get permission directly from the court.

The lender may file for a motion to release the automatic stay, thereby allowing it to repossess the car, but only if you have been far behind on the payments and it can prove that it is the primary party in interest.

If you file for Chapter 7 but don’t want to lose your car, then you can do one of three things.

  • Cure the default by paying off the back payments in full and get yourself current on the car payments.
  • Negotiate a continued payment plan with the creditor. This keeps you in debt even after bankruptcy, but you may be able to get your payments cut down. Creditors would usually rather let you keep the vehicle and continue taking payments instead of repossessing the car.
  • Redeem the vehicle by paying market value for it. This is a good option for people whose car is worth less than the amount owed for it. For example, if your car is worth $4,000 but the loan amount you have left to pay is more than that, then you could buy the car for the $4,000 and it would be yours.

If you file for Chapter 13, then you can set up a payment plan in the court that will allow you to continue paying for the car and therefore keep it. Occasionally, even if your car has already been repossessed, you can work out a payment plan in your Chapter 13 that will allow you to get your car back. This must be done quickly after the repossession, though.

Most people who file for bankruptcy are actually able to keep their cars, either by making it exempt, curing the default, or working out a lowered payment plan with the lenders. Give us a call and we can help you to stay on the road.

Garland & Mason, L.L.C.Bankruptcy lawyers



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