If you are considering filing for bankruptcy, you likely have certain assets that you want to keep during and after the proceedings are completed. Most states allow bankruptcy exemptions. Exemptions are those assets that are allowed under state and/or federal law to be withheld from the bankruptcy estate, and therefore are untouchable by the creditors. In some instances these exemptions can include your car. Moreover, when a Bankruptcy petition is filed, an automatic stay is implemented which prevents creditors’ collection activities, including the repossession of your car.
When considering whether or not to keep your car you have to take into consideration the type of ownership interest you have in the car, meaning is the car financed, leased or do you outright own the car. If you have a car loan, you can always return the car to the bank. There is no penalty for returning the car to the bank. You can also redeem the car, which means buying your car back from the bank at fair market value instead of the amount you actually owe. Lastly, you can renew (reaffirm) the car loan with the bank; however, you will need to be current on the car loan for this option. If you have a lease and you are current on your lease payments, then you may assume the lease and continue with your contract if you choose. If you can no longer pay the lease you may need to turn the car back into the dealership. If you own your car only in rare instances (the car is very expensive) will the trustee take your car, however, most of the time you will be able to keep your car.