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Exemptions with Bankruptcy

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Do I Get to Keep My Car If I File Bankruptcy?

Every day, someone calls our office and asks us this very question.  Cars are essential to our everyday lives. We use them to go to work, take our kids to school, and do our shopping.  If filing bankruptcy means losing your car, then filing bankruptcy would leave you in a worse situation than not filing at all.

For most people, you can keep your car in bankruptcy.  How you will be able to keep your car will depend on the bankruptcy exemptions and whether you file Chapter 7 or Chapter 13 bankruptcy.

Bankruptcy Exemptions

Although most people can keep their possession after filing a bankruptcy, there are times when people cannot.  Would it be fair if you could file a bankruptcy, get rid of all your debts, and keep a million dollars?  Of course not.  If you could, everyone would file bankruptcy.

Bankruptcy law puts generous limitations on the amount of possessions you can protect through a bankruptcy.  For nearly all people, bankruptcy law protects your car from your creditors, allowing you to keep it after you file.

Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, you can usually keep your car if it is paid off, or if you are current on payments.

Chapter 7 bankruptcy does not remove your obligation to pay off debt on your car, if you want to keep it. If you are making payments on your vehicle, you will be able to keep your vehicle after filing.   If, on the other hand, you want to give it up, we can discharge the debt.

Chapter 13 Bankruptcy

When you file a Chapter 13 bankruptcy, the Bankruptcy Court will issue an Automatic Stay that will stop repossessions and creditor harassment.  Although Chapter 13 bankruptcy will not allow you to discharge debts on a car you keep, it will allow you to pay it off at a reasonable interest rate over a reasonable period of time.  When you get done with your 3-5 year repayment plan, your car will be free and clear.