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

When you owe a significant amount of debt and you do not have options for paying it off, consumer bankruptcy could make a lot of sense for you. However, you likely have concerns about how certain types of property will be handled in your bankruptcy case, and whether you will lose property that you need. For example, if you rely on your car to get to work and to run errands such as going to the grocery store or picking your kids up from school, the prospect of losing your car can be devastating. As such, you may be wondering, “Can I keep my car if I file for personal bankruptcy?”

The answer to that question may not be the same for everyone, and it will depend upon your particular circumstances. However, we want to be clear that you certainly may be able to keep your car if you file for personal bankruptcy, and we will explain how that can work.

You Will Not Lose Your Car if You are Filing for Chapter 13 Bankruptcy

First, if you are filing for Chapter 13 bankruptcy, you should know that you will not lose your car since this is not a liquidation bankruptcy like Chapter 7. Instead, the Illinois bankruptcy exemptions—which we will get to shortly—are used to determine the amount of money you will need to repay to creditors as part of your repayment plan over the course of three to five years. If you have too much debt to be eligible for Chapter 13 bankruptcy but you have steady employment, you may be able to file for Chapter 11 bankruptcy, which is another form of reorganization bankruptcy, and you will still be able to keep your motor vehicle and to continue making payments on it.

The matter of keeping your car is a bit more complicated if you plan to file for Chapter 7 bankruptcy.

Chapter 7 Bankruptcy and Illinois Bankruptcy Exemptions

In a Chapter 7 bankruptcy, the bankruptcy trustee will liquidate all of your assets that are not exempt under Illinois law. While there are federal and state exemptions, debtors filing for bankruptcy in Illinois must use Illinois exemptions. For a motor vehicle, the Illinois exemptions allow a debtor to exempt up to $2,400 in the value of a motor vehicle. If that amount does not cover the value of your vehicle, you may be able to use the “wildcard” exemption of up to $4,000 to protect your vehicle from liquidation.

What will happen if you still owe a significant amount of money on your auto loan and you are filing for Chapter 7 bankruptcy? You may be able to work out a reaffirmation agreement with the auto loan lender to allow you to continue making payments on your vehicle after the bankruptcy case is finished, but you should seek advice from an experienced Oak Park bankruptcy lawyer before you move forward with any bankruptcy options.

Contact Our Oak Park Bankruptcy Attorneys

Whether you have questions about bankruptcy exemptions and keeping your car in your bankruptcy case, or you simply need assistance determining your eligibility for Chapter 7 or Chapter 13 bankruptcy, one of our experienced Oak Park bankruptcy lawyers can speak with you today. Contact the Emerson Law Firm for more information.


See Related Blog Posts:

What is a Charged-Off Debt?

Top Changes That Could Come to Consumer Bankruptcy in 2021

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