Can I Keep My Car During Bankruptcy?

 Posted on July 08, 2024 in Bankruptcy

Filing for bankruptcy can be a daunting process, and one of the most common concerns among people considering bankruptcy is whether they can keep their car. The answer to this question depends on several factors, including the type of bankruptcy you file, the value of your car, and your ability to make payments. An Illinois lawyer can help you understand the options available to you and help you understand how you can keep your car during bankruptcy.

If I File Bankruptcy, Can I Keep My Car?

The short answer is yes; it is possible to keep possession of your car when filing for bankruptcy in Illinois. However, the specific circumstances of your case will determine the best course of action. In a Chapter 7 bankruptcy, you may be able to exempt your car from liquidation if its value falls within the allowed exemption amount. In a Chapter 13 bankruptcy, you can keep your car by including it in your repayment plan and making the necessary payments.

Understanding Illinois Car Exemptions in Chapter 7 Bankruptcy

In Illinois, individuals filing for Chapter 7 bankruptcy can exempt up to $2,400 in equity for a single vehicle. If you own a car worth less than this amount, or if your equity in the car (the difference between its value and what you owe) is less than $2,400, you can keep your car. If the equity in your car exceeds the exemption amount, the trustee may sell the car to pay off your creditors, and you will receive the exempted amount.

Keeping Your Car in Chapter 13 Bankruptcy

If you file for Chapter 13 bankruptcy in Illinois, you can maintain possession of your car by including it in your repayment plan. Under this plan, you will make monthly payments to the bankruptcy trustee, who will distribute the funds to your creditors. You can keep your car if you continue making the required payments. In some cases, you may even be able to reduce your car payments or the total amount you owe on your vehicle through a process called a "cramdown."

Reaffirming Your Car Loan

Another option for keeping your car during bankruptcy is reaffirming your car loan. By reaffirming a debt, you commit to making payments on the loan as if bankruptcy never occurred. This can be a good option if you are current on your car payments and can afford to continue making them. However, it is essential to carefully consider the long-term consequences of reaffirming a debt, as you will remain personally liable for the loan even after your bankruptcy case is closed.

Contact a McHenry County, IL Bankruptcy Attorney

Retaining ownership of your car during bankruptcy is possible, but it depends on your specific circumstances. Understanding your options and having a Kane County, IL bankruptcy lawyer can help. Contact Thomas Law Office at 847-426-7990 to find out how we can possibly help you.