Motor Vehicles and Bankruptcy
Generally, you may keep your vehicle if you file for Bankruptcy. You may also choose to surrender your vehicle if you prefer not to keep it.
If you own your vehicle, you are permitted to keep it provided that you have less than $15,000 of equity in the vehicle. Also, married couples are allowed this exemption for two vehicles, one for each spouse.
If you are making payments on your car, you are permitted to keep it in a Chapter 7 Bankruptcy if you are current on your payments and have less than $15,000 equity in the vehicle. If you are filing for Chapter 7, and are late on your car payments, you must arrange some form of forbearance with your lender or find a way to get current with your past due payments. If the vehicle has more than $15,000 of equity, you may still be able keep the vehicle but you may have to come up with a way to pay the difference between the equity and $15,000 to your Bankruptcy Trustee (they usually will take payments).
If you are filing a Chapter 13 Bankruptcy and are late on your vehicle payments, you can keep the vehicle if you include the late payments in your payment plan. In order to keep the vehicle you must be able to resume making your regular monthly payments that would become due after the filing date of your Bankruptcy Petition.
In a Chapter 13, if you own your vehicle and had the same loan in place for the last two and a half years, we can reduce the principle balance of the loan to the fair market value of the vehicle. This can make it advantageous to keep your vehicle even if you owe more on your vehicle than it is currently worth.