This may be the most frequent question I am asked when I first meet with a new client. Thankfully, in most cases the answer is "yes", assuming you want to keep the car.
The Bankruptcy Code allow filers to keep their vehicles using the bankruptcy exemptions. The exemptions protect your car, home, and other personal property. The idea is to give filers a "fresh start", and a fresh start would not be possible if you were required to surrender all of your property to your creditors. You need your car to go to work, pick up your kids from school, and generally to live your life. So, it makes sense that bankruptcy law would you to continue doing these things by protecting your car.
However, this protection is not without some limitations and qualifications. First, in order to keep your car, you need to be able to continue to make payments. If you are behind on the payment, or do not have the income to make the payment going forward, you will need to surrender the car. Bankruptcy will wipe out your obligation on any amount owed, however the car will need to be surrendered. Bankruptcy law does not allow you to keep a car you cannot afford to pay for.
In some case, my clients want to surrender a car, either because the payment is too high, and/or the car does not run well (or at all). This is not a problem. In these cases, we will notify the finance company through the "Statement of Intent" that the car will be returned. You will be under no obligation to pay on the deficiency. Sometimes my clients believe they MUST keep their car, but they don't.
What if you are behind on the payment (perhaps due to temporary job loss) but wish to keep the car? You can still keep it through a Chapter 13 bankruptcy. Chapter 13 bankruptcy will allow you to catch up on the arrears and make the payment spread out over 3-to-5 years. Chapter 13 bankruptcy can even get your car back from the repo yard, as long as it has not been auctioned. Of course, this could make the car prohibitively expensive, but if you are comfortable with the payment and truly need the car, Chapter 13 bankruptcy can save it. It is rarely too late.
You cannot keep the car in Chapter 7 bankruptcy if you are behind on the payment. You will need to catch up (and keep the payments current) before filing. It is sometimes important to clearly explore all of these options before deciding what type of bankruptcy to file. Will you be able to finance another vehicle after bankruptcy? Do you owe far more than what the car is worth? What type of working condition is it in? These will be important questions to consider.
If you have multiple cars, or a motorcycle along with your car, the exemptions to protect them all may be strained. In these cases, we will need to examine the value and necessity of each vehicle. In any case, you can even keep multiple cars that are not exempt, as long as you file a Chapter 13 bankruptcy.
For now, it is only important to know that yes, you can keep your car in almost every situation in bankruptcy. Contact us if you wish to set up a free consultation. We will discuss any situation with your car and everything else relevant to filing bankruptcy.