In most cases, yes, you can keep your car when you file bankruptcy. Whether you can depends on the chapter you file, how much equity you have in the vehicle, and whether you are current on your loan. For Corona residents who rely on a car to get to work and around the Inland Empire, protecting transportation is often a top concern. At The Law Offices of Paul Y. Lee, we help clients plan their filings so they keep the vehicles they need. Call 951-755-1000 for guidance specific to your situation.
How Does Chapter 7 Treat Your Car?
In Chapter 7, the trustee can sell nonexempt property to pay creditors. California law provides a motor vehicle exemption that protects a certain amount of equity in your car. Equity is the difference between what the car is worth and what you still owe. If your equity falls within the exemption, or you owe more than the car is worth, the trustee generally has no reason to sell it.
What If You Have a Car Loan?
If you are current on your payments, you often have options for keeping the vehicle:
- Reaffirmation: You sign a new agreement to remain responsible for the loan
- Redemption: You pay the lender the car’s current value in a lump sum
- Retention: You keep making payments, if the lender allows it
Each option has trade-offs, so it is important to review them with an attorney before signing anything.
How Does Chapter 13 Help With Vehicles?
Chapter 13 is often a strong fit when a car is at risk. It lets you keep your assets while repaying debts through a three to five year plan. If you have fallen behind on car payments, the plan can spread out the past-due amount over time. In some situations, you may also be able to reduce the loan balance or interest rate, depending on when you bought the vehicle and how the loan is structured.
What About Leased Vehicles?
A lease is treated differently from a purchase. You can generally choose to keep the lease and continue making payments, or return the vehicle. Your attorney can review the lease terms and help you decide which choice fits your budget.
Can a Lender Repossess Your Car After You File?
Filing bankruptcy triggers the automatic stay, which pauses most collection actions, including repossession. However, the stay does not last forever if you stop making payments or fail to address the loan in your case. Staying in communication with your attorney is the best way to protect your vehicle.
What Should You Do Before Filing?
Gather your loan statements, registration, and an estimate of the car’s current value. Avoid selling or transferring the vehicle to a relative before speaking with a lawyer, since those transfers can create problems in your case.
Protect Your Transportation With The Law Offices of Paul Y. Lee
If you live in Corona and worry about losing your car, you have options. The Law Offices of Paul Y. Lee will review your loan, your equity, and your goals to recommend the right path forward. Call 951-755-1000 today to schedule a consultation.
