When filing for Chapter 7 bankruptcy, you can forfeit your vehicle, whether you bought the car or leased it, which relieves you of the liability. However, if you still need your car to get to work and take the kids to school, depending on your situation and financial viability, you may be able to hold on to the car under the following circumstances:
- If you have paid off the vehicle and the value is below Ohio’s vehicle exemption amount, you may be allowed to keep it after filing bankruptcy.
- Probably the easiest way to keep your car is through redemption, which allows you to pay the trustee the current value of the vehicle in one lump sum. This is a good deal if you owe more than it’s worth because you only have to pay for the current value of the car.
- If paying a lump sum is not economically feasible, you may also be able to enter into a reaffirmation agreement. Since lenders know that you have the option of turning in the vehicle and discontinuing payments, it is often in the lender’s best interest to work with you to negotiate a better payment plan than the original loan agreement because some money is better than no money.
It is important to remember that the point of filing for Chapter 7 bankruptcy is to discharge the burden of your debt. So the court may not allow you to sign an agreement that could exceed your budget.