Can I Keep My Car?

Dallas Fort Worth TX Bankruptcy Lawyers

Texas Chapter 7 & Chapter 13 Bankruptcy Exemptions Help You Keep Your Car

As you know, Texas is a big state and it’s awfully hard to get from one city to the next unless you own a car. Our bankruptcy clients are always eager to know if their vehicle is a protected asset when they file for bankruptcy. The simple answer is “Yes”, if you are current on your payments or own your car outright. Typically in Texas, you are allowed one vehicle per driving adult, depending upon your family’s situation.

What Vehicles are Exempt? What About Farm Vehicles?

Texas vehicle exemptions are generous. Specifically, under the Texas Property Code, you are allowed to keep:

  • “A 2-wheeled, 3-wheeled, or 4-wheeled motor vehicle for each member of a family or single adult who hold’s a drivers license or who does not hold a driver’s license but who relies on another person to operate the vehicle for the benefit of a non-licensed person;
  • Motor vehicles or boats used in your profession or trade.
  • Farming or ranching vehicles and implements.”

What if I Default on My Car or Truck Loan?

If you have defaulted on a car loan, your car acts as collateral, and therefore the lender can legally seize the car if you fail to timely pay them.

Chapter 7 Bankruptcy Protection for Vehicles

You do enjoy some form of protection under Chapter 7 bankruptcy, if you find yourself behind on loan payments. A bankruptcy stay order can put a temporary halt to repossession actions, and can also protect you if you choose to surrender the vehicle.

  • Automatic Stay Order — an automatic injunction goes into effect at the time of filing, and it stops all unsecured and secured creditors from collection activities, including the seizure of property and harassing phone calls. The lender must ask permission from the Bankruptcy Court to proceed with the repossession of your vehicle, unless of course, you voluntarily surrender the car to the loan company.
  • Discharge of Debts – if you voluntarily return your car to your credit union or lender, then the lien is satisfied. The unsecured debt you now owe can be legally discharged or “forgiven” at the end of a Chapter 7 bankruptcy.

Chapter 13 Bankruptcy Protection for Vehicles

If you are behind in your payments, and you qualify for a Chapter 13 repayment plan, you can pay back the car loan, including any late payments, in the 3 to 5 year time span allotted to you by the Bankruptcy Court.

Once your automatic stay order goes into effect, you are also protected from creditor harassment or collection actions, just as you are in a Chapter 7 filing.

Other Options to Help You Keep Your Car

Our knowledgeable bankruptcy lawyers at Fears Nachawati Law Firm can explain other options to you to help you keep your car, such as:

  • Reaffirmation Agreement – if you are paying your car note on time, and still wish to continue making car payments during a Chapter 7 bankruptcy, you and your lender can sign a reaffirmation agreement and file it for approval with the Bankruptcy Court. This allows you to continue making payments. This may be risky if you later wish to stop payments on your car loan because your lender can then repossess the car and charge you for deficiencies you may owe them, such as expenses incurred when the lender sells your car at auction. By doing this you forfeit your right to have your debt “forgiven” under Chapter 7 bankruptcy.

To learn more about our state’s generous homestead or car exemptions for bankruptcy, call a Dallas Fort Worth TX bankruptcy lawyer today. You can arrange a free initial consultation by calling Fears Nachawati Law Firm at .