What happens to my car loan if I declare bankruptcy?
My finances are a mess and I think bankruptcy is my only option. What will happen to my financed car?
Answer provided by
Answered on Apr 07, 2021
“If you have a car loan and file for bankruptcy, one of two things may happen. In the event that you can’t keep up with the payments, you’ll have to return the vehicle. But due to bankruptcy protection, you’ll be absolved of the remaining balance of the loan.
Keep in mind that you’ll need to make arrangements to give the car back to the lender. Otherwise, they’ll send someone to your house to repossess it.
Conversely, if you want to keep the vehicle, you can do that as well, provided that you have the financial means to do so. In Chapter 13 bankruptcy, you must show that you can pay off the balance in the next three years, courtesy of a Chapter 13 repayment plan.
If you file for Chapter 7 bankruptcy, you can keep your vehicle if you’re current on payments, thanks to the law’s motor vehicle exemption. Note that you’ll probably have to sign a reaffirmation agreement, but that’s a normal procedure under Chapter 7 bankruptcy laws. “
Did this answer help you?
Ask us a question by email and we will respond within a few days.
Have a different question?
You can meet us at our office and discuss the details of your question.
Browse by topics
What others are asking
Can I refinance my car loan without a copy of the original loan contract?
I've looked everywhere for my contract, but I can't find it. Can I go ahead with refinancing without it?
Apr 07, 2021
Can I get a car loan if I'm a rideshare driver?
I've been working as a rideshare driver for less than a month, but my car's started breaking down on me and I want to get a new one. Do I qualify for a car loan?
Mar 08, 2021
Will my home insurance cover items stolen out of my daughter's car?
"While my adult daughter was away for two weeks for work, a thief broke into her car (which was parked in my driveway) and stole high-value items worth more than $1,000. Will my home insurance cover these items since my daughter lives in my house? "
Apr 07, 2021