Bankruptcy and Vehicle Ownership in Texas: Keeping Your Car
Filing for bankruptcy can be a daunting process, especially when you’re unsure how it might affect your ability to keep essential assets like your car. For Texans navigating bankruptcy, understanding how vehicle exemptions, loan discharges, and repayment plans work is crucial.
Can You Keep Your Car During Bankruptcy in Texas?
Yes, in many cases, you can keep your car during bankruptcy in Texas. However, the specifics depend on factors such as the type of bankruptcy you file, the equity in your vehicle, and whether you’re current on your car loan.
Chapter 7 Bankruptcy and Car Ownership in Texas
In Chapter 7 bankruptcy, the trustee may liquidate non-exempt assets to repay creditors. However, Texas offers generous vehicle exemptions that protect your car if its equity is within the exemption limit. Texas allows you to exempt the full value of one vehicle per licensed household member or household member who relies on someone else for transportation. This means if your car is fully paid off and valued within a reasonable range, it’s likely protected.
If you’re current on your car payments and the equity in your car is covered by the exemption, you can typically reaffirm the loan and keep the car. Reaffirmation involves agreeing to continue making payments under the existing loan terms.
Chapter 13 Bankruptcy and Car Ownership in Texas
Chapter 13 allows you to restructure debts, including car loans, into a manageable repayment plan. This can help you catch up on missed payments and potentially reduce your interest rate. Through a process called cramdown, you may be able to reduce your loan balance to the car’s current market value if the loan was taken out more than 910 days before filing for bankruptcy.
For more information about Chapter 7 and Chapter 13 bankruptcy processes, visit U.S. Courts’ Bankruptcy Basics.
What Are Common Questions About Vehicle Ownership in Bankruptcy?
Can I keep a luxury vehicle during bankruptcy? Luxury vehicles are less likely to qualify for full exemption. If your car’s value significantly exceeds the exemption limit, the trustee may sell it and use the proceeds to pay creditors.
What happens if I’m behind on car payments? In Chapter 7, you may risk losing the car unless you can catch up on payments or negotiate with the lender. In Chapter 13, missed payments can be included in your repayment plan.
Can I buy a car after filing for bankruptcy? Yes, but you may need to wait until your case is discharged. Post-bankruptcy car loans often come with higher interest rates, so rebuilding your credit first is advisable.
How to Protect Your Car During Bankruptcy
Know Your Exemption Limits
Understanding Texas’ vehicle exemption laws is crucial. Consult with an experienced bankruptcy attorney to determine whether your car qualifies for full exemption.
Stay Current on Payments
If you have a car loan, maintaining on-time payments is essential to retaining the vehicle.
Reaffirm or Redeem
Reaffirmation involves agreeing to continue paying the car loan under its current terms. Redemption allows you to pay the lender a lump sum equal to the car’s market value to own it outright.
Work with a Bankruptcy Attorney
The complexities of Texas bankruptcy law make professional legal guidance indispensable. Attorneys can help you navigate the process and safeguard your vehicle.
Quick Tips for Navigating Vehicle Ownership During Bankruptcy
Document your vehicle’s value with an official appraisal or trusted tools like Kelley Blue Book. Keep track of payments to avoid jeopardizing your ability to retain the vehicle. Explore all options, whether through reaffirmation, redemption, or a Chapter 13 repayment plan.
Drive Into Your Financial Future with Confidence
Filing for bankruptcy in Texas doesn’t have to mean losing your car. With Texas’ generous vehicle exemptions and the right legal strategy, you can retain your vehicle and stay on the road to financial recovery.
At Kisch Consumer Law, we’re here to make the process smoother and less stressful. Whether you’re filing Chapter 7 or Chapter 13 bankruptcy, our team has the expertise to help you keep what matters most.
Take control of your bankruptcy journey today—and maybe give your car a little love while you’re at it (a fresh coat of wax never hurts).