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How Chapter 13 bankruptcy affects your car

On Behalf of | Sep 29, 2021 | Bankruptcy Law

Falling into debt is something that can happen to anyone if they’re not careful. When an individual has debts that they’re making a genuine effort to pay off but they still need help, there’s Chapter 13 bankruptcy. Also known as a repayment bankruptcy, this is a common route people take to regaining control over their finances. However, many Pennsylvania residents are unsure of the potential consequences, like if they’ll have a car taken away.

In most cases, you can keep your car

There are a number of ways that Chapter 13 might impact your car depending on your specific circumstances. However, the good news is that creditors aren’t going to take your vehicle in most cases.

As long as you keep up with your payments during the course of your bankruptcy, there’s the potential that some unsecured debts will be forgiven, which means that you don’t have to pay them, and it might include car payments.

Important considerations

For those who own a car outright, they will usually be able to keep the vehicle throughout the Chapter 13 bankruptcy. The exception to this is when a car is worth more than the state allows for this exemption. In that case, the individual has to pay the difference in order to keep their car.

It’s not necessary to pay this difference upfront. If your car’s value exceeds the bankruptcy law exemption, the value is parsed out over the course of your repayment plan, giving you time to come up with the money while still having access to your car.

There are many factors that go into filing for Chapter 13 bankruptcy, but you don’t usually have to worry about creditors taking your car. It’s a good idea to review your personal situation to ensure that you’re doing what’s best for your finances.



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