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Can you keep a car loan in Chapter 7 bankruptcy?
I really need my car for work, but I know declaring bankruptcy usually means losing all your assets. Can I still keep my car and loan when I file for Chapter 7 bankruptcy?
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
I’m so sorry to hear you’re filing for bankruptcy! Typically, you cannot keep your car loan in a Chapter 7 bankruptcy. But some states allow you to request a motor vehicle exemption when you file for bankruptcy. If approved, you’ll be able to keep your car!
However, the exemption is only good up to a certain amount of equity. For example, you may be able to keep a car with $6,000 in equity if your state motor vehicle exemption applies for up to $7,000 in equity.
If you can’t protect all of your car’s equity in the bankruptcy, your Chapter 7 trustee will:
- sell the car,
- return the exemption amount to you,
- deduct the sales costs and the trustee’s fee, and
- use the remaining proceeds to pay off outstanding debts.
If you’re going into bankruptcy, it may be a good time to start saving on car insurance with
Jerry
. A licensed broker, the Jerry app can help you find and compare quotes from over 50 top providers for free. That way, you know you’re getting the best rate on the coverage you want. Users save an average of nearly $900 a year on car insurance with Jerry!View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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