Will I Have To Give My Car Up If I File Bankruptcy?

October 20, 2011 by  Filed under: Bankruptcy 

The short answer is, no. You can keep your car when you file for bankruptcy. However keeping your car through a bankruptcy gives you different options to do so.

Here are the three most popular ways to keep your car after you file for bankruptcy. Some states may have different rulings for keeping your car after filing a bankruptcy. Check with your local laws.

Knowing These Three Options Can Give You Peace Of Mind – And A possible Way To Keep Your Car


With the first one, the legal term is called a reaffirmation of the auto loan. In this situation your attorney has the chance to negotiate with your lender doing what he can to get better terms on the loan. He can do his best to negotiate a lower interest rate. Perhaps the lender will adjust the term of the loan and both of these would save you money on your monthly payment.

If your lender shows no flexibility with the current terms of the loan, you may be better off to include the loan with the bankruptcy and surrender the car.

With a reaffirmation you are essentially taking on a new car loan for your old car. If your attorney feels that you can do this and responsibly pay back the loan, he will fill out the necessary paperwork for you to sign. The decision will ultimately be that of the judge, he has the ability to reject the reaffirmation agreement.

Ride Through

The next option is to ride through the existing loan. This may be a good choice if you are near the end of the loan and the car is still in good working condition. This may not be available in all states so you will need the advice of your attorney as to what your jurisdiction allows.

If you choose to do a ride-through, you may no longer receive monthly statements so it will be your responsibility to continue making the payments. Because of the bankruptcy laws prohibiting lenders from contacting you in regards to unpaid debt, this may be little more risky. You will need to pay close attention as to the due date and be sure to pay the payment on time so your vehicle is not repossessed.


Another choice is to redeem the vehicle and pay cash for the true market value of your car. For example, if you owed $6,000 on the car and it is worth $2,000, you can pay the market value of $2,000 and take over ownership of the vehicle. The balance will be written off with the rest of debts on your bankruptcy.

One More Thing…

With all this said, I also want to include the suggestion that you may choose to release any car payments with the bankruptcy, especially if you owe more on your car than what it is worth.

If this is your situation then it might make more sense to get rid of your car through the bankruptcy. Then search for a sub-prime loan and get a new car so you can start over without the negative equity.

If you enjoyed this article and want to learn more, Click Here… we have the antidote for your car buying blues during and after your bankruptcy.

Here’s a short video for you from 9News called, Coming Back From Bankruptcy that can help you get the car you need and want much easier.

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