Your Car in Bankruptcy

If you file for bankruptcy, what happens to your car and car loan depends, in large part, on what type of bankruptcy you file -- Chapter 7 or Chapter 13.

In Chapter 7 bankruptcy, you can keep your car if you are current on your loan payments and the equity is exempt. If your car has already been repossessed, you might be able to get it back if you act quickly.

In Chapter 13 bankruptcy, you keep your property, including your car. Of course, you'll have to keep current on payments, and can even make up missed payments through your Chapter 13 plan.

Chapter 13 provides some additional bonuses when it comes to your car. You might be able to reduce the loan balance of the car (called a cramdown) and reduce the interest rate.