Your Car in Bankruptcy

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Whether you can (or should) keep your car in a bankruptcy depends on several factors. First of all, if you've got positive equity in your car (meaning your car loan is less than the car is worth) then your states automobile exemption will need to cover that equity. If you owe more on the car then it's worth, then you've got nothing to worry about, because bankruptcy is only interested in your equity.

Consequently, if you own an expensive car, and owe a lot of money on it, you may choose to discharge the car loan debt, stop making the payments and let the car be repossessed. It's not a pleasant thing to think about, but if you're struggling with debt, maybe it's time to get a more modest car. Bankruptcy allows you to walk away from a big car loan with no liability repercussions.

If you're your states automobile exemption does not cover the equity you have in your car, then you have the option to "reaffirm" the car loan debt. This means it will not be discharged in the bankruptcy, and so long as you stay up to date on your car payments. If you own the car outright, and it's value is not adequately exempted, then you can "redeem" the value by offering to pay the difference between the exemption amount and the value of the car.

Learn more about your options with regard to your car by browsing through the topics below.

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