Can You Keep Your Car After Filing Bankruptcy in Texas?
Many people worry about how filing bankruptcy in Texas will affect their property, and one question that often comes up is, “can I keep my car?” Each state permits people who file for bankruptcy to save certain “exempt” assets when filing, including motor vehicles. In fact, Texas law allows your household to exempt the total value of one car per licensed driver, as well as for vehicles that non-licensed household members rely on for transportation.
Can You Keep Your Car in Chapter 7 in Texas?
While Chapter 7 is known as a““liquidation”” bankruptcy that requires non-exempt assets to be sold to pay back your creditors, you cannot be forced to sell an exempt car against your wishes. The lender also cannot repossess your vehicle while your bankruptcy is in progress.
Because the debts you owe on your vehicles will be discharged during bankruptcy, you will technically not have to pay back the loan. However, if you stop making your payments after filing, the lender can (and will) repossess the car, and you will lose it.
Fortunately, you can keep your car after filing through reaffirmation or redemption. If you reaffirm the vehicle, you will essentially sign an agreement to continue paying back the remaining balance on your auto loan. If you choose to redeem instead, you can purchase it straight out by paying its current retail value in total. While this option can save you thousands if you owe more on your loan than your automobile is worth, it can be challenging for many people to come up with a large sum of money, so reaffirmation is usually the most popular option.
What Happens to Your Vehicle in Chapter 13?
After filing for Chapter 13 bankruptcy in Texas, you can keep your vehicle as long as you continue to pay for it. This means you can continue to make payments on your existing loan, or you can choose to include your auto loan in your 3-to-5 year repayment plan. If you include it in your plan, you may also be able to““cramdown”” the amount you owe on the vehicle by reducing your auto loan principal to the car’s fair market value and/or lowering your interest rate.
Texas law exempts many other types of property. This ultimately allows many people to keep most, if not all, of what they own after filing. Some of these exemptions include:
- The entire value of your homestead (primary residence)
- Personal property including food, clothing, furniture, home goods, jewelry, firearms, and pets.
- Health savings accounts
- Most retirement accounts and pensions
- Insurance benefits
If you are considering filing for bankruptcy but are worried that you will lose your car or truck, call or text DebtStoppers in DFW Texas today at 469-646-0750 to discuss your concerns. You can schedule a free consultation with one of our knowledgeable Texas lawyers to review your financial situation and recommend which type of bankruptcy will help the most. And if saving your vehicle is important to you, we can work out a plan that allows you to find financial freedom while keeping your family on the road.