Can I Keep My Car if I File for Consumer Bankruptcy?

If you are struggling with debt and are thinking about filing for consumer bankruptcy, you probably have many questions about how liquidation bankruptcy and reorganization bankruptcy work. In particular, consumers often want to know if they will be able to keep a particular piece of property if they file for Chapter 7 bankruptcy since this is a liquidation bankruptcy. In other words, many consumers hear that, with a liquidation bankruptcy, all property will get liquidated in order to repay creditors. When a debtor files for bankruptcy in Illinois, that person is allowed to keep certain property even with a liquidation bankruptcy. These are known as “exemptions.” There are both federal and state exemptions, but anyone who files for bankruptcy in Illinois must use the Illinois exemptions.

When it comes to exemptions and what type of property you can keep, we know that many debtors want to know, “Can I keep my car if I file for bankruptcy?” The answer to this question depends on several different factors, which we will discuss below.

Are You Filing for Chapter 7 or Chapter 13 Bankruptcy?
If you are wondering whether you can keep your car if you file for bankruptcy, the first question that you will typically need to answer is whether you are planning to file for Chapter 7 or Chapter 13 bankruptcy. Since Chapter 7 bankruptcy is a liquidation bankruptcy, this is usually the type of bankruptcy where a debtor will use available exemptions in order to keep property. Differently, with Chapter 13 bankruptcy, debtors usually are able to get back on track with automobile payments through their bankruptcy repayment plan since Chapter 13 is a reorganization bankruptcy.

So, if you are planning to file for Chapter 13 bankruptcy, the question of whether you can keep your car may not become an issue. However, if you are planning to file for Chapter 7 bankruptcy, then you will need to determine whether the available exemptions will let you keep your vehicle.

Illinois Motor Vehicle Exemption
Under Illinois law (735 ILCS 5/12-1001), certain types of personal property are exempt. Under this law, a debtor is only allowed to exempt up to $2,400 in value of a motor vehicle. As such, if your vehicle is worth more than $2,400, you may not be able to prevent the car from being liquidated.

However, Illinois also has what is known as a “wildcard” exemption that permits a debtor to exempt up to $4,000 in personal property. You may be able to apply this wildcard exemption to your motor vehicle if it is worth less than the total amount that can be exempted. Yet these issues likely only will apply if your car is totally paid off. If you still owe money on your vehicle, you may need to approach the question differently of whether you can keep your car in a personal bankruptcy proceeding.

Reaffirming the Debt on Your Car
If you still owe a significant amount of money on your car but want to keep the car, you may be able to reaffirm the debt. This means that the motor vehicle will not be part of the bankruptcy proceeding, and even if all other debt is discharged, you will remain responsible for making payments on your car.

Before you consider reaffirming any debt, you should speak with an Oak Park bankruptcy lawyer.

Contact a Bankruptcy Lawyer in Oak Park
Do you have questions about personal bankruptcy, including concerns about exempt property? An experienced Oak Park bankruptcy attorney at our firm can speak with you today. Contact the Emerson Law Firm to learn more.


See Related Blog Posts:

New Report Addresses Trends in Consumer Bankruptcy

Revisiting the Issue of Medical Bankruptcies

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