Can I keep my car if I file Chapter 7 bankruptcy?

by Dan Nunley

Car keysUsually the answer is yes. But there are many factors that affect whether or not a person filing bankruptcy can keep their car or truck including how much your vehicle is worth, how much you owe on the vehicle and how far behind you are on the payments at the time you file for Chapter 7 bankruptcy.

Let me begin by talking to the people who have a loan and are making payments for their vehicle. You have three (3) choices:

First, you can surrender or give back the car.

You need to be honest with yourself and ask if it is in your financial best interest to keep your car or truck.

  • Can you really afford the vehicle?
  • Will your financial situation make it difficult for you to make the payments each month?
  • Do you have equity in the vehicle or are you upside down owing more than the vehicle is worth?

If you can’t afford the payments, or you owe significantly more than your vehicle is worth, Chapter 7 bankruptcy will allow you to surrender or give back your vehicle and walk away without owing another penny. That can be a good deal for many people who are in a bind regarding their car or truck. Then you get something to drive that you can really afford. It may be just a “beater” but that’s OK if it will get you back and forth to where you need to go until you can save up for something better.

Second, you can redeem the car.

Redemption is the process of buying your car back from the bank/credit union/finance company for the fair market value of the car. Did you get that? Buying back for what the vehicle is really worth as opposed to what you owe for it. If you are substantially upside down, redemption can be a terrific deal.

However, redemption requires a lump sum payment and most people filing bankruptcy don’t have a large amount of cash just sitting around. But maybe a family member or friend could loan you the money. Or you can check with companies that specializes in financing vehicle redemptions such as  722 Redemption Funding. These companies charge high interest rates but it can still be a good deal since you would be significantly reducing the principal owed on the vehicle. If you are considering obtaining financing for a redemption, you should investigate the terms before filing for bankruptcy to make sure that you meet the qualifications for a redemption loan.

Third, you can reaffirm the car loan.

Reaffirmation is the renewal of a loan between a lender and a borrower. This means that if you sign a Reaffirmation Agreement, the bankruptcy will not discharge or wipe-out the vehicle loan. You would still owe that money to your vehicle lender and should you not be able to pay in the future, your lender would be able to pursue all legal methods of collecting that debt.

In order to reaffirm your car loan, you will need to be current on the car. And your budget must reflect that you have the ability to make the car payment without it being a financial hardship.

If you lease your vehicle:

If you are current on your lease payments, then you may assume the lease and continue with your contract if you choose. If the lease payments are too high, then you may wish to reject the lease and turn the car back into the dealership.

If you don’t owe money on your vehicle:

If you own your car or truck outright, meaning there is no loan on the vehicle, then in Oklahoma, you can keep the vehicle with no problem if it is worth $7,500.00 or less. Each bankruptcy debtor is allowed a $7,500.00 exemption for a motor vehicle so if a husband and wife file bankruptcy together, they can stack or combine their exemptions and protect a single vehicle worth up to $15,000.00. If the vehicle is worth more than the allowed exemption amount, then you would owe the difference. If you were unable to pay the Chapter 7 trustee the difference, then the trustee could take your vehicle, sell it at auction, and give you back $7,500.00/$15,000.00.

Each bankruptcy case is different, so the decision whether to keep or return a vehicle must be made on a case-by-case basis.

If you’re struggling with debt problems and would like to know more about how bankruptcy may be able to help you, contact Dan Nunley today by completing the “Contact Dan” form on the right side of this page. I’ll get back in touch with you as soon as I can to schedule a FREE initial telephone consultation. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.

{ 1 trackback } » Blog Archive » BLT (Bankruptcy Lawyer Topics): “Cars!” – by Matt Leichter, Esq.
January 15, 2010 at 4:33 pm

{ 100 comments… read them below or add one }

Allen May 22, 2010 at 10:02 pm

In Oklahoma here,

What if I my wife and I file jointly and have 2 cars? one valued at 6400 and the other at 8600 equaling the 15k total for joint bankruptcy filers? Is it permitted or will the exemption be for 1 car under 7500 and not the other car over the 7500. (Those really are the car values) or at least very close depending on what you look at nada, kbb, craigslist etc…

Dan Nunley June 4, 2010 at 8:37 pm


The specific exemption for motor vehicles allows each debtor to exempt up to $7,500.00 equity in a single vehicle. There is no provision for apportioning the amounts as you suggest. However, in my experience, a Chapter 7 trustee normally abandons his/her interest in a vehicle with equity that is minimally in excess of the allowed $7,500.00 exemption. The $1,100.00 excess equity in your scenario generally is not enough money to cause a trustee to seek the turn over and liquidation of that vehicle. After deducting expenses from the sale proceeds and then having to give the debtor $7,500.00, there would be only a minimal amount leftover for the benefit of the creditors.

Dan Nunley

Sara June 15, 2010 at 4:50 pm

Hi Dan,

Thanks so much for the knowledge you are giving everyone thus far!

My bankruptcy was discharged June 2010. Before it was discharged I completed the reaffirmation agreement for my leased car. The finance company received the reaffirmation agreement and sent it in to the courts in April 2010 I thought I was done.

Once I received the BK discharge I contacted the car finance company to ensure I would start receiving statements again and start auto-pay etc. and they informed me that the courts never received the reaffirmation agreement (due to it be lost in the mail etc.), therefore my my car loan has been discharged BUT as long as I continue to make payments I can keep the car, and once it’s paid of I will receive the title. HOWEVER, they will NOT report my payments to the credit bureau, therefore I can’t build my credit back up this route.

Any tips or advice?

Thank you!

Dan Nunley June 17, 2010 at 7:20 pm


It looks like you’ll have to decide whether it’s in your best interest to continue to make voluntary vehicle payments knowing that those payments are not being reported to the credit bureaus OR whether you should surrender the vehicle back to the finance company and go finance another vehicle which vehicle payments would be reported to the credit bureaus. I don’t know your specific situation, so I can’t advise you which choice would be in your best interest. I wish you well.

Dan Nunley

robert barker July 30, 2010 at 5:54 pm

Like Pedro M., we went through the reaffirmation with Toyota and I suspect they weren’t interested because my lawyer didn’t receive it. Our cars were purchased Feb 2007, when we filed it was April 2010.
When we have called they say we can make voluntary payments, and my wife being concerned, as about repo, and they said they weren’t interested in taking away the car. I know I don’t owe a deficiency, but is it possible that they won’t repo the cars if i stopped voluntary payments? I am in the process of calling them to verify.

Dan Nunley July 30, 2010 at 7:12 pm


If you stop making the voluntary payments, I guarantee that Toyota will repossess the vehicles. If you want to keep the vehicles, you need to stay current and continue to make voluntary payments.

Dan Nunley

Rachael August 5, 2010 at 8:58 am

Yesterday, my redemption offer to Toyota was approved by a judge because Toyota did not object and did not show up for the hearing in person or by phone. My father is a co-signer on the account, but has not been contacted by Toyota throughout this. Is it safe to assume that the redemption offer that was approved, stands? Or can/will they now go after my dad for the remaining balance?


Dan Nunley August 10, 2010 at 9:42 am


Based on the information you have provided, you would need to exercise your right of redemption pursuant to the court’s order. However, in my opinion, the redemption order would not absolve your father of liability for the difference in the balance of the car note and the redemption price since he co-signed the original note. You don’t tell me where you live and I am licensed to practice law only in Oklahoma. I would suggest that you contact a knowledgeable bankruptcy attorney near you for advice regarding your specific situation.

Dan Nunley

Wes August 31, 2010 at 8:52 pm

Hi Dan,
I went bankrupt in 2008, and all my debts were discharged including my auto loan. Auto loan wasn’t reaffirmed. Recently, I was in an auto accident which affects my income. Now, I can’t pay on the loan any longer. Can I surrender the vehicle without having to pay the balance of loan or what happens from here?

Nathan September 5, 2010 at 1:14 pm


My chapter 7 bankruptcy was discharged in January 2010. I tried to reaffirm my loan on a truck, but they would not. We have been making voluntary payments since. If I return the truck at this time, would it reflect bad on my credit? I thought I could continue making payments, but we need a less expensive car. I will have to finance it though.



Dan Nunley September 16, 2010 at 9:24 am


Since you did not reaffirm the debt owed on your truck, it was discharged in your Chapter 7 bankruptcy. Your credit report should accurately reflect that a zero balance is owed now on that debt due to a bankruptcy discharge. Therefore, should you choose to stop making voluntary payments and surrender the vehicle, there is nothing further that should be reported on your credit report. If a creditor did report inaccurate information to a credit bureau, you would have a claim against that creditor as either a violation of the discharge order or a violation of the Fair Credit Reporting Act.

Dan Nunley

Brenda November 9, 2010 at 2:31 pm


I filed Chapter 7 bankruptcy and signed a Reaffirmation Agreement for my car but the finance company refused to sign the Reaffirmation Agreement due to me representing myself pro se. My question is can I now return the car to the finance company without being sued for not making any more payments and will it go on my credit as a repo? My payments are current but they’re not reporting to the credit bureau. I received my discharge in October 2010

Thanks in advance for your help!


Dan Nunley November 11, 2010 at 1:07 pm


If the Reaffirmation Agreement was never filed and approved by the court, then the debt you owe the finance company was discharged in your bankruptcy. Therefore, you can surrender the car at any time to the finance company and you don’t owe another penny for the car. Your credit report should only reflect that the debt was discharged in bankruptcy. If the finance company inaccurately reports a repossession to the credit bureaus, you should write to the credit bureaus involved and dispute the matter. The credit bureau will then have thirty days in which to investigate the matter and correct and inaccurate information.

Dan Nunley

Tracy Clark December 1, 2010 at 1:37 pm

Hi there. I filed bankruptcy in California without an attorney and I reaffirmed my car. I’ve completed the creditors meeting and reaffirmation hearing but haven’t received my discharge yet. Anyway, I wanted to keep my car because I thought with my bad credit, I wouldn’t be able to buy another one. However, I’ve come to find out I have people to help me with a used vehicle and I will be getting a big tax refund. My car is 6 years old, has 80,000 miles on it and is in bad shape. I still owe $15,000 on it. It’s not worth keeping and I’ve changed my mind. What can I do – file something or just stop paying and let car get repossessed? Also, I didn’t have to reaffirm my house, and wondering why now? Thanks so much.

Adrian December 6, 2010 at 11:28 pm

Our bankruptcy was discharged on 11/23/2010 and we are still behind in our truck payments. We did not reaffirm so what happens next? We want to keep the truck.

Walt December 10, 2010 at 6:29 pm

Reaffirmation agreement signed and sent to finance company for automobile prior to discharge. Finance company did not file the reaffirmation agreement. Discharge occurred March 2010. Is the debt completely discharged? May I keep the automobile and tell finance company that they failed to file the reaffirmation agreement so the debt has been discharged and they have no further right, title, or interest in the automobile?

Dan Nunley December 10, 2010 at 10:40 pm


While the debt has been discharged, the finance company’s lien on the vehicle is still good. Therefore, if you do not continue to make voluntary payments, the finance company can legally repossess the vehicle.

Dan Nunley

Dan Nunley December 10, 2010 at 10:46 pm


The automatic stay terminated upon the entry of your bankruptcy discharge. While the debt you owe on the truck was discharged in your bankruptcy, if you want to keep the truck, you need to get current and stay current on your payments. Right now, since you are behind in your truck payments, the finance company can legally repossess the truck at any time without warning.

Dan Nunley

Dan Nunley December 10, 2010 at 10:57 pm


Once a reaffirmation agreement is approved by the bankruptcy court and filed, you have 60 days or until your discharge is entered at the latest, to rescind the reaffirmation agreement. If the reaffirmation agreement is not rescinded in a timely manner, then you will remain liable to the finance company for the reaffirmed debt. If you don’t rescind and the vehicle is repossessed, it will be sold at auction for less than you owe, and the finance company will then sue you for the deficiency.

Regarding your question concerning the reaffirmation of real property, you didn’t have to reaffirm the promissory note and mortgage on your house because the Bankruptcy Code does not require reaffirmation agreements of debts secured by real property. The section of the bankruptcy code dealing with reaffirmation agreements specifically mentions them only in relation to personal property not real property.

Dan Nunley

James Williams July 21, 2011 at 4:24 pm

Hi Dan,

I recently filed chapter 7 bankruptcy and now I need to get a car really badly. I haven’t received my discharge papers but I have a co-signer ready to help me get a car. Will that affect anything at all?

Dan Nunley July 21, 2011 at 4:30 pm


A post-petition debt, such as financing the purchase of a vehicle after you have filed bankruptcy, is not included in your bankruptcy and will have no negative effect on the issuance of your discharge.

Dan Nunley

Kim August 30, 2011 at 9:40 am

I filed Chapter 7 in 2009 and I ask to keep my car and my furniture I thought everything was taking care of I started having alot of problems with the car so I was going to trade it in for something else and the credit report was pulled in 2011 and it had my car is filed under Chapter 7 bankruptcy and I was making payments every month for the car. Can they do that thats like double payments, what can I do I let the car go back because I couldnt drive it without problems.

Rich G August 31, 2011 at 7:59 am

Dan, I purchased a new vehicle in 2009 for 37.5k, paying 20k down (because I wanted to reduce the burden and interest) and financing the rest along with tags, extended warranty and taxes towards a grand total of 43k. I still owe approximately 17k. This vehicle is a financial burden as I haven’t worked in a while. Is there anything that can be done to legally wipe the debt and keep the vehicle?

Dan Nunley August 31, 2011 at 8:03 am


If you and the finance company didn’t sign and file a Reaffirmation Agreement that was then approved by the bankruptcy judge, then the debt you owed on the car was discharged in your bankruptcy. Since then, you haven’t been making double payments, you’ve simply been making voluntary payments in order to be able to keep and use the car since the finance company still has a lien on the car. If you’ve now changed your mind and wish to surrender the car back to the finance company, you can do that and not owe another penny on the car since you did not reaffirm the debt.

Dan Nunley

Dan Nunley August 31, 2011 at 8:10 am


No, there’s no way for you to legally wipe out the balance of what you owe on the vehicle and be able to keep the vehicle. If you qualify to file Chapter 7 bankruptcy, you could legally wipe out the balance you owe on the vehicle but since the bankruptcy discharge doesn’t wipe out the finance company’s lien, you would then have to choose to either surrender the vehicle or continue to make voluntary payments.

Dan Nunley

Michelle October 13, 2011 at 5:35 pm

I filed bankruptcy 2 years ago in Colorado, I did not reaffirm my car loan but have been making the payments, I missed last months payment due to surgery and called to make a double payment this month and was advised they are attempting to repo my car, and that there is no grace period on late payments that they can begin the repo process if I am 1 day late. Is that true?

Tasha October 13, 2011 at 7:42 pm

I filed a Chapter 7 and didn’t reaffirm my auto loan. I am in Virginia by the way. I have been making payments since then … over a year now. I have been unemployed and now recently employed. I started to make payments and even brought my car current 2 months ago. I found out today that the loan was charged off shortly after that. I want to keep my car because I am paying payments on time now. I spoke to a representative and she was giving me info on how to send in payments. Never mentioned repossession. What can I expect? Can I still make payments on a charged off account and keep the car or should I expect them to come get it?

Sam October 13, 2011 at 7:45 pm

I recently filed Chapter 7 bankruptcy. I have gone to my creditors meeting. But today I got a call from the bank on my car, asking if I was going to reaffirm. The car is worth $5000 and we owe $3900. I want to know if I need to reaffirm to keep the car, or if it will be discharged with the bankruptcy?

Dan Nunley October 19, 2011 at 1:05 pm


I wouldn’t advise a Chapter 7 debtor to reaffirm a car note that exceeds the fair market value of the car. If you don’t reaffirm the car note, then your bankruptcy discharge will wipe out the debt owed on the car. However, the finance company’s lien on the car will still be valid. Therefore, you should ask the finance company if they will allow you to keep the car and just make voluntary car payments without reaffirming the debt. My experience has been that most banks, credit unions, and finance companies allow this. However, if the finance company won’t agree to accepting voluntary payments and you don’t reaffirm the debt, then the finance company will take the car back.

Dan Nunley

Dan Nunley October 19, 2011 at 1:09 pm


While a creditor cannot collect on a discharge car note, there is nothing stopping you from continuing to make voluntary payments on a discharged car note. Generally my experience here in Oklahoma has been that when a Chapter 7 debtor does not reaffirm a car note but wants to keep the car, the vast majority of banks, credit unions and finance companies will allow the debtor to keep the car as long as the payments are kept current for the simple fact that the finance companies would rather have the money than the vehicle.

Dan Nunley

Dan Nunley October 19, 2011 at 1:16 pm


Since you didn’t reaffirm the car note, once your discharge wiped out your liability for the car debt, the contract was no longer effective. Therefore, any payments you make post-discharge are strictly voluntary. As long as you make timely payments and stay current, finance companies are generally happy. However, if you are one day late, the finance company has the right to enforce it’s lien and repossess the vehicle. I would think that if you can make the payment and bring your account current, the finance company would be happy and call off the repossession. But obviously I can’t guarantee that.

Dan Nunley

Matthew Eller November 18, 2011 at 3:27 am


If I was discharged from bankruptcy in June, and reaffirmed on my car is it now to late to go back and let the car go back if it is through a Buy here Pay here company?


Dan Nunley November 18, 2011 at 9:03 am


In my legal opinion, it is rarely in a debtor’s best interest to reaffirm a secured debt. Unfortunately, you are now bound by the terms of the reaffirmation agreement as it is too late to rescind the agreement. A reaffirmation agreement may be rescinded either prior to the discharge being entered or prior to the expiration of sixty days from the date of the reaffirmation agreement being filed, whichever date occurs later. Here’s a recent article that I wrote on this very subject.


Brad January 12, 2012 at 11:27 am

I just refinanced my vehicle, hoping that the lower payment would help with my debt. However, after doing so, I realize that the difference in payment is not sufficient enough to make up for my monthly expenses and now I’m still upside down by about $4k on the vehicle with a longer loan. I’m planning on filing for Chapter 7 here in the next month – will I still be able to surrender the vehicle?

Thank You,

Dan Nunley January 12, 2012 at 11:33 am


Yes you will still be able to surrender the car when you file bankruptcy next month. A recent refinance of the car note will not cause any problems regarding the surrender of the vehicle and the discharge of that debt. I wish you well.

Dan Nunley

Brad January 12, 2012 at 11:42 am


Thanks much for answering my question. I have been so scared that because I had refinanced it would be ‘new’ debt and I’d still be stuck with the car. One less worry for me. Your website is great … if only I lived in Oklahoma, I’d be calling you for your help in filing. Your advice is much appreciated by many people here!


Victoria Kennedy January 22, 2012 at 10:58 am

Can a credit union keep my title on my car (even though the car loan is paid off) if I owe on a credit card through them?

Dan Nunley January 23, 2012 at 8:03 am


Yes, a credit union can do this because of something called cross-collateralization. Here’s a recent blog post that I wrote on this very situation.

Dan Nunley

LaShawn Gilliam January 29, 2012 at 10:40 am

My husband filed for bankruptcy a week ago had a car that was repossessed and he had a house that was forclosed on. Now the courts are asking for a statement of intention. Why? We put the car and house under unsecured claim on Scheduled E.

Dan Nunley January 31, 2012 at 10:24 am


The Court is asking for a Statement of Intention because it is a required document in all Chapter 7 cases. If you don’t file the Statement of Intention, your case will likely be dismissed due to the deficiency.

Also debts consisting of deficiencies from repossessions of motor vehicles or foreclosures of real property should be listed on Schedule F not Schedule E.

Dan Nunley

Brad March 14, 2012 at 11:20 am

Hi Dan,

I have another question regarding a vehicle and bankruptcy. I am planning to surrender my current vehicle when I file soon. I want to secure and have another vehicle to drive before I surrender my current one. Can I finance a less expensive, older vehicle before I file and then include and only surrender the first vehicle in my bankruptcy? I’ve heard conflicting answers about this and want to be sure I have a car either way.

Thanks again,


Steve March 15, 2012 at 4:59 pm

I live in New York. If I file Chapter 7 bankruptcy, will I lose my used car that’s worth $4,000 – $5,000?

Dan Nunley March 21, 2012 at 9:07 am


Yes you could finance the purchase of a less expensive, older vehicle prior to filing bankruptcy and then surrender your more expensive vehicle in your bankruptcy. Since I am an Oklahoma attorney and you don’t live in Oklahoma, I suggest that you contact a knowledgeable, experienced bankruptcy near you for further advice. Local rules and procedure, exemptions, and case law vary tremendously from bankruptcy jurisdiction to bankruptcy jurisdiction. I wish you well.

Dan Nunley

Dan Nunley March 21, 2012 at 9:13 am


In Oklahoma, you are allowed to exempt or protect $7,500.00 equity in a vehicle. However, since you live in New York, I would suggest that you contact a knowledgeable, experienced bankruptcy near you for further advice. Exemption laws that determine how much vehicle equity you may protect vary greatly from state to state. I wish you well.

Dan Nunley

Mariann Lesley April 3, 2012 at 2:26 pm

My husband and I are considering bankruptcy here in Oklahoma. We have always been able to pay our bills on a regular basis but I lost my job last fall and we became unable to pay our credit card bills. I am back to work now but none of these creditors will set up a payment plan to allow us to catch up. My husband and I both have vechicles which we have a loan on. We are able to pay all of our household bills and our house and car payments, just not our credit card bills. Will we be able to keep our vehicles so that we have transportation to anf from work? We have stayed pretty current on them (never more than 30 days past due).

Dan Nunley April 4, 2012 at 9:04 am


Oklahoma exemption law would allow you and your husband to each protect up to $7,500.00 equity in a motor vehicle when you file Chapter 7 bankruptcy. Therefore, if each of your vehicles are not worth more than $7,500.00 over what you owe the finance company, the bankruptcy will have no effect on your ability to keep the vehicles. If you have more than $7,500.00 equity in one or both vehicles, the worst case situation is that you would need to pay your Chapter 7 trustee the difference. However, unless your equity is substantially in excess of $7,500.00, the trustee generally would not make a claim on the excess equity. The best thing you can do at this point is to contact a knowledgeable, experienced bankruptcy attorney for a consultation during which you can discuss all of the specifics of your financial situation. I wish you well.

Dan Nunley

Melissa March 1, 2013 at 8:57 pm

I am going to file bankruptcy in the next month in Oklahoma. I am married but am filing alone. I have a vehicle in my name only that I still owe $6000 (worth maybe 4500 to 5000). My husband and I have another vehicle in both our names and we owe $2500 on a title loan for it (vehicle worth about $7000). I am not sure what to do, definatley want to keep the vehicle with the title loan. I would also like to keep the other car. What would my options be?

CC March 12, 2013 at 5:53 pm

Hi Dan,

I am contemplating Bankruptcy. I have a 2000 Ford Explorer that is paid for, which I use for work. It’s blue book value is around $4,000.00. My dilemma is that I also have an old 1994 Ford Mustang that I am co-owner registered. This Mustang is so old the odometer quit working passed 190,000 miles, I estimate it had over 300,000 before it quit running. I can’t even find a value for it in the non running condition. My question is can I keep it? (if it were running value is $1,100-1400. that range with lower miles.

Dan Nunley March 15, 2013 at 7:33 am


Oklahoma bankruptcy exemptions allow an individual to exempt or protect $7500.00 equity in a motor vehicle which means you could legally protect your 2000 Ford Explorer. However, you most likely would also be able to keep the 1994 Ford Mustang because in my experience, a Chapter 7 trustee generally will not take a non-exempt vehicle that is older than ten years old and has more than 100,000 miles on it because that vehicle generally isn’t worth enough money to sell at a bankruptcy auction and get more than a minimal amount to pay to unsecured creditors. So even though you can’t legally protect the 1994 Ford Mustang, a trustee is likely to abandon the bankruptcy estate’s interest in the vehicle and allow you to keep it.

Dan Nunley

Dan Nunley March 15, 2013 at 7:39 am


Oklahoma bankruptcy exemptions allow an individual to exempt or protect $7500.00 equity in a motor vehicle. Therefore, I would advise you to use your $7,500.00 exemption to protect the equity you have in the vehicle you own jointly with your husband. You would also be able to keep the vehicle that you own individually since you owe more to the finance company than the vehicle is worth and therefore your Chapter 7 trustee will have no interest in taking that vehicle away from you. If you want to keep it, you’ll just have to stay current on your payments to the finance company. Hope that makes sense.

Dan Nunley

Leave a Comment