During an initial bankruptcy consultation, the first concern our client usually has is “Can
I keep my car if I file for bankruptcy?” Most people need a car, and the thought of having
it repossessed is a scary one.

When filing for bankruptcy, it is important to understand what is truly yours and what can
be taken away before you begin the filing process. A good bankruptcy lawyer can help
you by informing you of what to expect during the bankruptcy process.

Here are a few things to consider as it relates to keeping your vehicle during bankruptcy.

Are you filing for Chapter 7 or Chapter 13 bankruptcy?

If you are filing for Chapter 7 bankruptcy, you are allowed to keep, or exempt, the
property that your state deems necessary to continue working and maintaining your

As long as you are current on your car payments, you may be able to reaffirm your debt
and exempt your vehicle from the bankruptcy. In Georgia, motor vehicles are exempt up
to $5,000 of equity.

  •  For example, if you purchased a car worth $20,000 from a car dealership but you
    still owe $16,000, you have $4,000 of equity in the car. Therefore, the car would
    be exempt for purposes of the bankruptcy, and you could keep your car under a
    Chapter 7.

On the contrary, if you have a high amount of equity in the car, or are behind on your
payments, Chapter 13 bankruptcy might be a better option.

In Chapter 13 bankruptcy, you may be allowed to keep your property, including some
nonexempt assets. Instead of having to sell your property to pay your creditors, you will
pay a specified amount of your debts through a 3-5 year repayment plan. The court must
confirm this payment plan.

  • If you want to keep your car when filing Chapter 13 bankruptcy, you must simply
    keep current on your Chapter 13 plan payments. If you were behind when you
    filed, you can pay off the overdue debt, or arrears, through the repayment plan.

Do you pay on a car loan or lease your vehicle?

If you pay on a car loan, you may want to sign a reaffirmation agreement, which is a
legally enforceable contract that allows your car loan to pass through the discharge, or
cancelled debts, after a Chapter 7 bankruptcy.

  •  Most lenders will insist you sign the agreement and will not report on time
    payments unless it has been signed. However, this is a serious decision, as the
    debt will survive the discharge and you will be personally liable on the debt.

If you lease your vehicle, you can choose to assume, or keep your vehicle when filing for
Chapter 7 bankruptcy. This means that you will continue to make the monthly payments
the lease demands. You can also choose to continue making the monthly lease payments
when filing for Chapter 13 bankruptcy.

The purpose of bankruptcy is to help borrowers who have gotten in over their heads with
lenders. However, this can be frightening when facing the possibility of losing your car
among other personal property. With the right lawyer at your side, you will be able to
make the most informed decisions to aid you in keeping your motor vehicle, while at the
same time avoiding overwhelming monthly payments.

Our attorneys at Hall & Navarro have decades of experience with the local courts.
We know the bankruptcy process well. Our bankruptcy team has helped hundreds of
people find relief from overwhelming debt, and get a fresh financial start. If you or a
loved one are struggling to understand the process of keeping your car when filing for
bankruptcy, take the first step by completing our free online case evaluation. Our legal
team will then contact you for your free consultation to see if filing bankruptcy could
help you.