Workers need a car, that’s just a fact. Unless you live in a centralized city like New York, a car is a necessity. If you want to get a job, keep a job, shop, take the kids to school and other outings, the car is essential to daily survival. But what about a debtor filing for Chapter 7 or Chapter 13 bankruptcy, can he/she keep their car? If the car has a loan, that’s not affordable and a debtor is filing bankruptcy it is natural to assume that the creditor will demand the property back. But there are ways to save your car during bankruptcy, even if you have a car loan. When a debtor files for Chapter 7 bankruptcy, he/she can "redeem" the car by paying the lender the value of the car and discharging the rest of the car loan in bankruptcy. In a Chapter 13 bankruptcy a car can also be "redeemed" if the car loan is more than 910 days old or if the loan was not used only for purchasing the loan (i.e. a rollover loan from a trade-in).
If the debtor in bankruptcy does not have the cash available to pay for the value of the car, he/she is allowed to take out a loan to do so, even while in bankruptcy. This is good news for debtors facing upside down car loans. These debtors can file bankruptcy and keep their car.
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