Can You Keep Your Car After A Chapter 7 Bankruptcy?

Some individuals file for bankruptcy to have their debts eliminated. However, there are certain limitations present depending on the type the debtor is filing for. Chapter 7 bankruptcy, for example, may involve the liquidation of some assets. Hence, it’s reasonable why someone would want to know if they can keep their vehicle during Chapter 7 bankruptcy. The following is a comprehensive response.

Understanding The Basics Of Bankruptcy

Consiga Ayuda Legal De Un Profesional Legal Del Capítulo 7 De Bancarrota En Austin TexasBankruptcy laws and rules may differ slightly from state to state, such as in Austin, TX versus New York, but the requirements are generally the same. Many people worry about losing all their belongings, including their vehicles when filing for Chapter 7 bankruptcy. However, there are exemptions available for certain assets or personal property that can be protected. 

Each state has motor vehicle exemptions that dictate how you can protect your car. The main factors determining if you keep your car include the following.

State Exemptions

Each state has specific exemption statutes that protect property during bankruptcy proceedings. In Texas, the exemptions for vehicles are particularly generous. In Chapter 7 bankruptcy, individuals in Texas can keep the entire value of one car for each licensed household member. Additionally, a car can be exempted for a household member without a license if they depend on someone else to operate the car for them.

If you live in Texas, you generally won’t lose your car if you have only one. However, if you have more than one car, you’re only entitled to keep one of them. Moreover, in Texas, you can keep property that you need to continue working and providing for your household. 

Car Value

Apart from exemptions, the value of your car is an important factor to consider in Chapter 7 bankruptcy. When filing for it, you are required to state the current fair value of assets such as your car. The fair value takes into account the age and condition of the car and can be easily found on auto dealer websites.

In most cases, you will only be able to keep your car if its value is within the exemption amount allowed in your state. For example, if your car is valued at $6,000 and the state exemption is $8,000, you will likely be able to keep your car.

Equity In A Car

If you have a car loan that you have not fully repaid on a car valued at $20,000, and you owe $10,000, then you only have $10,000 in equity in the car. In this case, you may be able to protect the car if you qualify for a $10,000 exemption. This means that the trustee overseeing your Chapter 7 bankruptcy cannot sell your car because your motor vehicle exemption is sufficient to protect the entire equity of the car.

However, if your car is worth $15,000 (without a loan) and your state exemption is $5,000, the trustee can sell the car, subtracting the $5,000 exemption and any sales-related expenses, and using the remaining amount to pay off your creditors.


If your car is considered nonexempt property in Chapter 7 bankruptcy, there may be an option to buy it back and keep it. This usually applies when you want to keep your car and are willing to negotiate a deal with the trustee to pay a certain amount. It’s also possible to set up a payment plan to buy back your car.

Seek Help From A Bankruptcy Lawyer At Lincoln-Goldfinch Law

Important Aspects To Keep In Mind When Declaring A Chapter 7 Bankruptcy In TexasFiling for bankruptcy can be a daunting task, but you don’t have to go through it alone. With a bankruptcy lawyer from Lincoln-Goldfinch Law by your side, you can have the peace of mind that comes with knowing you have someone in your corner. Bankruptcy lawyers will guide you through the entire process, from understanding your options to representing you in court and negotiating with creditors. You can avoid common mistakes and pitfalls that could hurt your case.

Summary: Can You Keep Your Car In Chapter 7 Bankruptcy?

Each state has specific exemptions that protect certain assets, including vehicles. For example, in Texas, individuals can keep one vehicle per licensed household member. The fair value of the car and any loans or equity in the car are also considered when determining whether or not it can be kept during bankruptcy proceedings. 

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