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Bankruptcy FAQs Top-Rated Attorneys in Los Angeles

Will I Lose My Car If I File for Bankruptcy?

Helping You Keep Your Vehicle in Bankruptcy

Having a car is essential for most Americans. When people are thinking about bankruptcy, one of their primary concerns is keeping their vehicle.

At RHM LAW LLP , we understand you need transportation to and from work, as well as for running errands and other purposes. That’s why our lawyers are dedicated to helping people filing Chapter 7 and Chapter 13 bankruptcy find the debt relief they need while retaining their cars.


For more detailed bankruptcy information tailored to your unique situation, call our office at (213) 344-0043 to schedule a free consultation.


When Can I Keep My Car During Bankruptcy?

Whether or not you can keep your vehicle during bankruptcy can depend on several factors:

  • Do you own the vehicle? If you own your vehicle, you generally do not have to worry about losing your car, as it is generally protected by exemptions. This is usually applicable to older vehicles with lower market values.
  • Is your vehicle covered by bankruptcy exemptions? If your vehicle's market value is lower than the exemption amount, your vehicle can be covered under the exemption, which protects it from being liquidated by the trustee.
  • Can you keep up with car payments if you financed or leased it? If you are still paying off a car, you have the option to catch up on past payments and reorganize the loan into more affordable monthly payments. If you cannot afford the monthly payments, you may need to consider surrendering the vehicle to the lender.

It might reassure you to know that most people who file bankruptcy are able to keep their car. In fact, in bankruptcy, oftentimes we are able to reduce a car’s value to fair market value and force the lender to accept the payments through a Chapter 13 bankruptcy repayment plan. As a result, your monthly car payments can be significantly reduced.

What Are the Motor Vehicle Bankruptcy Exemptions?

The Bankruptcy Code is designed to help debtors, not punish them. As such, bankruptcy law protects certain property classified as exemptions, including allowing a petitioner to retain a car as an exemption.

In California, the 704 Motor Vehicle Exemption (System 1) allows protection of up to $3,325 in equity.

The 703 Motor Vehicle Exemption under System 2 allows up to $5,850 of equity for cars.

What If My Car Is Being Repossessed? Can I Stop It?

If you are behind on your car payments, the lender has the right to repossess the vehicle. However, when you file either Chapter 7 or Chapter 13 bankruptcy, the court issues an automatic stay. This freezes all repossessions, giving you time to catch up on missed payments. Even if your car was recently repossessed, filing bankruptcy can help you get it back — and get it back fast.

If you file Chapter 7, you may be able to retain your car if you make timely payments. Under Chapter 13, you may be able to keep your vehicle by paying the creditor the value of the car rather than the full amount due on the debt.

We Are on Your Side

For answers to all your bankruptcy questions, including repossession and reaffirmation agreements, count on RHM LAW LLP . Our bankruptcy attorneys have helped thousands of clients overcome financial problems and get back on track.

Contact our firm to arrange a complimentary consultation with a bankruptcy professional who understands how important it is that you retain your vehicle.

From our offices in Los Angeles and Encino, we serve clients in Los Angeles, San Fernando Valley, Riverside, San Bernardino and Orange Counties. Payment plans are available.

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Committed to making the process as stress-free as possible for our clients, our Los Angeles bankruptcy attorneys and dedicated staff will handle everything for you. From filling out paperwork through getting end results, we will work to help your case run smoothly and efficiently. We serve our clients in English, Spanish and Farsi.