Services
Insurance
Loans
Repairs
Advice
About

What happens to my car if I file for bankruptcy?

I've hit some really dire financial straits, and I've been advised by a friend that I should start bankruptcy proceedings. While I have a number of questions, I want to know what happens to my car. Can I keep it? Or will it be repossessed?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
I’m sorry to hear that you may have to file for bankruptcy—but there is a silver lining. Whether you file Chapter 7 or Chapter 13, you can still keep your vehicle in most situations.
In Chapter 7 bankruptcy, you may be able to keep your car if the value of the vehicle is below your state’s exemption limit and you’re up to date on your
car loan
payments.
If your car’s value is more than your state’s exemption limit, several things might happen:
  • Your trustee will sell your vehicle, give you cash up to the exemption amount, and use the rest to pay off debt
  • The lender may reposess the car if you’re behind on payments
  • You can surrender your vehicle during bankruptcy proceedings
In Chapter 13 bankruptcy, you won’t liquidate your assets. Instead, you opt for debt repayment plans, which allows you to pay your debt in three to five years. If you owe more than the current value of the vehicle on your car loan, you may get to keep the car with a reduced principal. In other cases, you can keep your car if you don’t qualify for a reduced repayment plan, but you’ll need to get up to date on payments.
With any luck, you’ll fall under one of the scenarios that allows you to keep your car. You’ll also need to keep full coverage auto insurance on your loan, regardless of which situation you fall under.
To save the most money possible on your insurance, try using the
Jerry
app. We’ll get you personalized quotes from top-of-the-line providers so that all you need to do is choose the plan that works best for you without any hassle.
Best of luck with everything, and here’s hoping your financial straits improve.
MORE: Can I keep my car in a bankruptcy?
View full answer 
WHY YOU CAN TRUST JERRY
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.

Join 4M+ members in lowering their car insurance

Easiest way to compare and buy car insurance

√
No long forms
√
No spam or unwanted phone calls
√
Quotes from top insurance companies
Find insurance savings