Can I Keep My Car in a Bankruptcy?

Whether or not you can keep your car if you file bankruptcy depends on two factors.

Do you own it outright?

How much is it worth?

Secured Car Loans and Leased Cars in Bankruptcy

First, if your car is security for a car loan, you can keep your car, but only if you continue making your car loan payments. This applies to both a car that is financed through a bank or other lender, or a car that is leased through an automotive finance company.

Before agreeing to continue making car payments, you should determine the value of the car, and the amount that remains owing on the loan. If there is significant negative equity, it may not be wise to keep the car.

For example, if you used your car as security for a $30,000 consolidation loan, and the car is only worth $5,000, it is not financially prudent to agree to pay $30,000 so that you can keep your $5,000 car. Unless the lender is willing to reduce the amount of the loan to more closely match the value of the car (which is unlikely), it may be prudent to surrender the car to the lender when you file bankruptcy. The resulting shortfall is then included in your bankruptcy.

Bankruptcy Exemption Limits and Your Car

Second, if there is no car loan, you can keep the car if it is under the allowable exemption limits for your province. Each province has different exemption limits, so you should consult a local bankruptcy trustee to more information.

In most provinces the exemption limit is around $5,000 – $7,000, so if a car with no loans is worth less than that, you would be allowed to keep it. If the appraised value of the car is greater than the exemption limit,you could keep the car, but only if you pay into your bankruptcy estate the non-exempt portion.

There are other factors to consider and each case is unique, so I suggest you consult a local bankruptcy trustee for a no charge initial consultation to determine your options for keeping your car if you file bankruptcy.