Debt can be an overwhelming burden and you may be feeling that weight in your own life right now. Bankruptcy is a source of relief for many, but you’re worried about whether you would have to give up your car if you decided to file for Chapter 7. From going to work to taking a trip to the store, cars are often one of the most important possessions in our lives.

To pay off creditors, Chapter 7 involves liquidating property that is not exempt from the bankruptcy proceedings. Your automobile is not automatically exempt from this process and could be sold to pay off your debt. Luckily, there are a few ways to retain your ownership of your car even after filing for Chapter 7. How you do that largely depends on whether or not you own your car or if you are still making payments.

You own your car

If you own your car, you need to file for an exemption when filling out the Schedule C form. By exempting your automobile, you will be able to keep it safe from being liquidated. This can only be done for personal or family cars; a car used solely for a small business cannot be claimed in this way.

You’re still paying off your car

There are two primary ways to keep your car after filing for Chapter 7 bankruptcy if you are still in the process of paying it off:

  • Reaffirming the car debt: If you reaffirm your car debt, you agree with the party that you are making payments to and promise not to discharge the debt during the Chapter 7 filing. This makes you liable for the amount remaining but allows you to retain possession of the vehicle.
  • Motion to redeem: When you file for bankruptcy you can purchase your car outright for the retail value. If you choose to pursue this option, the car must be bought in a single lump sum payment.

Filing for bankruptcy can seem intimidating, but it is made to protect consumers like you and get their lives back on track. Many people can use the options available to go through Chapter 7 proceedings while keeping their car. It can be the start of a new beginning for you, unencumbered by the weight of debt.