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What happens to my car loan during Chapter 7 bankruptcy?
I'm considering filing for Chapter 7 bankruptcy, but I'm worried about what might happen to my vehicle. Do I get to keep it? And what about my car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
I’m sorry you’re dealing with that; Chapter 7 bankruptcy can be stressful! However, you do have a silver lining: you may be able to keep your car—and your car loan.
In Chapter 7 bankruptcy, you may be able to keep your car if you’re up to date on your
car loan
payments and the value of your car is below your state’s exemption level for Chapter 7 bankruptcy proceedings.If your car’s value is more than your state’s exemption limit, several things might happen:
- You can voluntarily surrender the vehicle, which will go toward the debt you owe when it’s sold
- The lender can repossess your car, sell it at an auction, and use the money to pay your debt
- Your trustee can sell the vehicle, give you the exemption value, and use the remained to pay down debt
If you’re allowed to keep your car, your bank will still require you to maintain full coverage car insurance on the vehicle. Since bankruptcy is all about cutting expenses and liabilities, make sure to get the best deal on the coverage you need. One easy way to do this is through the
Jerry
app—we’ll get you personalized quotes from different top-of-the-line insurers, so that all you need to do is pick the plan that works best for you.Best of luck with the proceedings. Hopefully, better days are ahead!
View full answer
- Gregory R.
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