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Keeping Your Car When Filing Chapter 7 Bankruptcy

Yellow TruckIn a Chapter 7 bankruptcy, you usually have several choices to make about your truck or car. If you owe money on your car, you must let the Court and the lender know what you wish to do. You do this by filing a Statement of Intentions with your bankruptcy paperwork.

You have 3 options.


  • Surrendering Your Car – If you choose to give back your car, you tell your vehicle lender that you intend to surrender the car. Once you have given up your car, you are granted a discharge to the remaining amount of the car loan (or lease) and you do not have to pay the lender back.

  • Reaffirmation – If you owe money on your car and want to keep it, you may do so if you keep making your payments. You may also need to enter into a reaffirmation agreement with the lender.  Essentially this is a new promise to repay the balance of the car loan in spite of the fact that you filed for bankruptcy. If you sign a reaffirmation agreement then you will be held liable personally for any default after your bankruptcy. In other words, if you fall behind on the car after bankruptcy the lender will be able to repossess the car AND demand you pay the unpaid balance.

  • Redemption – The third option is to redeem your car. It is also the rarest of the three options.  You can keep your car by paying the lender the value of the car in a single payment.  So if you owe $23,000.00 on your truck and it only worth $11,000.00, you could pay $11,000.00 in one payment and keep your truck. A motion will have to be filed and you will need to be able to pay the value of the car in full.  This option is rare because few people have access to the funds necessary to make such a large single payment.



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Posted June 2014/Updated June 2016