Filing for bankruptcy protection often comes with one overriding fear: losing your car. For most Texans, a vehicle isn’t a luxury—it’s how you get to work, take your kids to school, and handle daily life.
The good news is that, in most cases, you can keep your car after filing for bankruptcy. The outcome depends on how the vehicle is financed, whether you’re current on payments, and which chapter you file under.
Why Cars Are a Common Concern in Bankruptcy
Cars are usually tied to loans, and loans come with lenders who have legal rights. When someone files for bankruptcy, they worry that those rights automatically mean repossession.
That isn’t how bankruptcy law works. Bankruptcy is designed to balance creditor rights with a debtor’s need to maintain basic living necessities—including reliable transportation.
How Bankruptcy Treats Vehicles
A car loan is a secured debt. That means the lender holds a lien on the vehicle until the loan is paid in full. Bankruptcy won’t affect the lien on your vehicle, but will only determine whether you can keep the car while dealing with the debt attached to it.
Two questions matter most:
- Is the car paid off?
- If not, are you current on payments and able to keep paying?
Keeping a Car in Chapter 7 Bankruptcy
Chapter 7 works well when debt is overwhelming, and income is limited. Many filers keep their vehicles under Chapter 7, especially in Texas. You must, however, submit to a means test to qualify to discharge debts in a Chapter 7 proceeding.
If your car is paid off, the Texas exemption law often protects the full value of the vehicle– the trustee cannot take it.
If the car is financed and payments are current, you typically have a number of options:
- Reaffirmation, where you agree to keep the car and continue making loan payments
- Redemption, where you purchase the car by paying its current value in a lump sum
- In some cases, you may be able to simply keep the car and make ongoing payments, without the need for a reaffirmation agreement.
A Texas bankruptcy lawyer will review those details, help you choose the right type of bankruptcy filing, and prevent you from making mistakes that can lead to unnecessary repossession.
What If You’re Behind on Your Payments?
Chapter 7 provides an automatic stay that temporarily stops repossession, but it does not forgive missed payments. If you are significantly behind and cannot catch up, the lender may eventually seek relief from the stay in order to enforce their lien (repossess the car). In those situations, Chapter 7 may not offer lasting protection for the vehicle.
Keeping a Car in Chapter 13 Bankruptcy
Chapter 13 is often the better option when saving your vehicle is the priority. It allows you to:
- Catch up on missed payments over three to five years
- Stop repossession long-term
- In some cases, restructure the loan based on the car’s value
For Texans who fell behind due to job loss, illness, or reduced income, Chapter 13 can provide breathing room that Chapter 7 cannot.
When Surrendering a Vehicle Makes Sense
Keeping a car isn’t always the best financial move. If the loan is upside down (you owe more on the vehicle than its fair market value), your payments are unaffordable, or the vehicle is unreliable, surrendering it through bankruptcy can eliminate the loan balance entirely. That can free up income and reduce financial pressure moving forward.
Read Also: Don’t Give Your Car Away or Repay Your Friend Before Filing Bankruptcy
Take Action Today to Explore Your Options
Whether you can keep your car after bankruptcy depends on facts that are unique to your situation. An experienced bankruptcy attorney can help you protect what matters most while clearing the debt holding you back.
At the Law Office of Carrie L. Weir, we’ve helped clients across Rockwall, Kaufman, Dallas, Collin, and surrounding counties navigate bankruptcy with clarity and confidence.
Contact us online or call 972-772-3083 to schedule your free consultation and find out how bankruptcy can help you regain financial stability—without losing the transportation you rely on.
