Can I Keep My Car if I File Bankruptcy?

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 14, 2022

You may be able file bankruptcy and keep your car if you can protect the equity in it.

Exemption laws allow debtors to keep property that the state determines is necessary for them to continue working, up to a certain amount of equity. The value of your car, minus the value of any outstanding loan payments, is its equity.

If your state allows exemptions of an equity amount greater than that of your car, you may keep it.

f the equity amount does not cover the full value of your car, you will have to work with the trustee overseeing your case to try and keep it.

If your car is worth more than what your state exempts, then when the creditors sell your car, they will give you back the equity that was exempt, and distribute the remaining funds to your creditors.

How to Declare Bankruptcy and Keep Your Car

If the amount your creditors would receive from selling your car, after all associated sales costs, is too little to be worth the effort, they may decide to abandon your car and let you keep it anyway.


What does bankruptcy mean?

Bankruptcy is a legal proceeding in which a debtor declares their inability to pay back their creditors.

What are the different types of bankruptcy?

There are three common types of bankruptcy known as “chapters” in the U.S. bankruptcy code, Ch. 7, Ch. 11, and Ch. 13, each with varying criteria and consequences.

What is Chapter 7 bankruptcy?

Chapter 7 is known as a liquidation bankruptcy. Most of your property will be sold to pay off your debts, then whatever debt in excess of the value of your liquidated property will be cleared.

What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy is a reorganization bankruptcy. With Chapter 13, you are able to keep your personal property and reorganize your debts to a payment schedule that enables you to pay back your creditors over time (often 3 to 5 years).

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

Find Advisor Near You