Will I lose my car if I owe more money on it than it is worth? 29 Answers as of March 05, 2012

The bankruptcy trustee has no interest in a car or house where there is no equity available to pay creditors. So, no, bankruptcy won't force you to lose either. However, you really need to think about why you want to keep assets that aren't worth what you are paying for them.

You will not lose these cars/homes in bankruptcy just because they are upside down but you do need to continue making regular payments in order to stay current and keep the vehicles. The bankruptcy filing will discharge your obligation to pay but if you do not pay for these things then the creditor still retains the right to repossess or foreclose.

Generally, you can keep the car as long as you keep making the payments on it. You are free to repay any debt you like after you file your bankruptcy case.

The law used to be that as long as you remained current on the car payment the lender could not repossess the vehicle. This was sometimes referred to as the "ride through" option in that the lien against the vehicle would ride through bankruptcy unaffected. That is no longer the case. Now, lenders are entitled to repossess the vehicle, even if the payments are current, unless the debtor "reaffirms" the debt. Reaffirmation means that you agree to be liable for the debt that is being reaffirmed as if the bankruptcy had never been filed. Reaffirmation agreements are discouraged by the bankruptcy court because they frustrate the policy of providing the debtor with a "fresh start." Not all lenders will repossess the vehicle because, as a practical matter, they want the money more than they want another used car sitting on their lot. However, they have the legal right to do so unless the debt is reaffirmed. In your case, you owe more than the car is worth, so reaffirming the debt is probably a bad idea and may be disallowed. In Chapter 13 bankruptcy, depending upon when the vehicle was purchased, you may be able to reduce the balance owed to the vehicle's fair market value.

You meet with a lawyer, who likely can protect your car if you want to keep it.

You can choose to keep it and reaffirm the debt, surrender it an owe nothing more, or redeem it for current value. If you owe substantially more than its worth than it would not be in your best interest to reaffirm it but it is your choice (so long as you can afford it).

You can surrender it in a bankruptcy and owe nothing or you can keep it as long as you stay current with the payments

You can you keep your car and your home when filing Chapter 7 or Chapter 13 Bankruptcy. But since it sounds like your car is worth a lot less than what you owe, you should consider letting it go in the bankruptcy, discharging the debt you owe and just get a new ("used") car.

You will only lose the car during a Bankruptcy if you choose not to Reaffirm the debt (ie: you don't make the payments). However, if you owe more than the car is worth, you should seriously consider if it is in your interest to keep paying for something that is worth less than the amount owed.

If you keep up the payments on your secured debts, you will be able to keep them. Your question should be whether you should keep a car that is worth substantially less than you owe on it.

If you want to keep the car you can reaffirm the debt, which means you are entering into a contract and agreeing to pay the debt after your bankruptcy is completed. In a Chapter 13 bankruptcy, you can move the court to reduce the amount of the lien on the vehicle to make it equal to the value of the vehicle. (i.e. the car is worth $10,000 but you owe $15,000 you can adjust the loan to $10,000 and that is all you would have to pay). If you want to keep the house and can afford the mortgage payment you can reaffirm it and keep the house, but you must be current with your payments to file a Chapter 7 bankruptcy. In a Chapter 13 you can make up any payments that are behind as part of the plan and can then reaffirm the mortgage and agree to pay it after the bankruptcy is discharged. You can also remove second (and/or third) mortgages that have no equity, meaning the value of the house is used up with the first mortgage and there is no additional value above the amount owed on the first mortgage. The decision to file a Chapter 7 or Chapter 13 is a big one and you should consult with a skilled bankruptcy attorney in making this decision. Further, the decision to reaffirm a debt is a big decision as it is contrary to the concept of the bankruptcy discharge so you should consult with an attorney about whether reaffirming the debt is advisable. With all that said, you can typically keep your car and house even if you don't file a reaffirmation agreement so long as you maintain the payments. You may not get credit for the payments after the bankruptcy is discharged on your credit reports, depending on the lenders.

You will not lose a car that has no zero equity.

If you keep making the payments, you should not lose the car. If you file a bankruptcy you can attempt to renegotiate the debt on the car and the interest rate in order to get a favorable deal.

In a chapter 13, you can asjust the loan according to the current market value of your car. I.e. if your car is worth 40k, and you have a loan for 80k, you can cram the loan to 40k. Although attorney's fee for chapter 13 is considerably higher, you can pay it in installments through your chapter 13 plan.

If you file a Chapter 7 and there is no equity in the car or house, the Chapter 7 Trustee will not take either from you because there would be no benefit to your creditors. If you file a Chapter 7 and there is no equity in the car or house, you may be able to keep the car and/or house if you maintain the payments. This can be done through a reaffirmation agreement if the lender requires one but do not sign any reaffirmation agreement before talking to your attorney first. Any decision on the car or house needs to be approached on a financial basis. In other words, can you afford the items I highly suggest talking to a Bankruptcy Attorney before proceeding further.

No, the bankruptcy trustee will not want to take a car that has no equity, but the lender will want you to sign a reaffirmation agreement which means the debt will survive bankruptcy so you should discuss that with your attorney before filing bankruptcy.

You can keep your car by reaffirming the debt in a chapter 7 bankruptcy, whether you are upside down or not. Whether it is smart to do so is another matter altogether. It may make more sense to let the vehicle go (with the excess debt that is still owed after the car is auctioned off) being discharged in bankruptcy. Another option is a chapter 13 bankruptcy, which effectively lets you do a payment plan through the court. The details of this (particularly as to possible "cram-down" possibilities) are best discussed with a lawyer in person. Please feel to call me or another lawyer in your area to discuss your options.

Not if you redeem or pay for the car per your contract.

You can surrender your car when you file for bankruptcy, which will relieve you of any further payments. You may also be able to reduce your payments if your vehicle is currently worth less than the amount owed.