DAY 16 — Will I Lose My Car if I File Bankruptcy in Maryland?
Week: Week 3: Fear + Objections
Intent: High-Intent | Keep Car in Bankruptcy
Most people keep their car in bankruptcy. Learn Maryland's vehicle exemption, how to reaffirm a car loan, and what redemption means for your situation.
In most cases, you can keep your car in bankruptcy. If you're current on payments, you reaffirm the loan and continue paying. If you're behind, Chapter 13 can let you catch up. Maryland's vehicle exemption also protects up to $6,000 of equity in one vehicle.
Maryland Vehicle Exemption
Maryland allows you to protect up to $6,000 of equity in one motor vehicle. If your car is worth $15,000 and you owe $12,000, your equity is $3,000 — fully within the exemption and protected. If you own the car free and clear and it's worth less than $6,000, you keep it.
Your Options for a Car in Chapter 7
Option 1: Reaffirm the Loan
You sign a reaffirmation agreement, keeping the loan in place as if bankruptcy never happened. You keep the car, keep the payments, keep the obligation. Most common approach for vehicles people want and need.
Option 2: Redeem the Car
Pay the lender the current market value of the car in a lump sum — not the full loan balance. If you owe $18,000 on a car worth $10,000, you can redeem it for $10,000. Requires coming up with that cash.
Option 3: Surrender the Car
Give it back to the lender. Your loan obligation is discharged — you won't owe any deficiency balance. Only makes sense if the car isn't worth keeping or the payments are unaffordable.
Your Options in Chapter 13
Chapter 13 is often better for car loans. You can cure arrears through the plan, and in some cases 'cram down' the loan — reducing what you owe to the car's actual value (for loans older than 910 days). This can dramatically reduce your monthly payment on an underwater vehicle.
What If My Car Is Being Repossessed?
If your car has already been repossessed but the lender hasn't yet sold it, filing bankruptcy can sometimes allow you to get it back — particularly in Chapter 13. Act quickly; lenders can sell repossessed vehicles fast.
Maryland-Specific Insight
Maryland allows bankruptcy filers to choose between state and federal exemption schemes. Federal exemptions sometimes offer more vehicle protection (up to ~$4,450 for a motor vehicle, plus a 'wildcard' exemption that can be applied to a vehicle). Compare both before filing.
Reality Check
Losing your car to bankruptcy is not the norm — it's the exception. If you're current on payments and your equity is within the exemption, keeping your car is straightforward.
Related Questions
→ Will I Lose My House If I File Bankruptcy?
→ Can Bankruptcy Stop Repossession the Same Day?
→ What Debts Are Eliminated in Chapter 7?
→ Is Chapter 13 Better Than Chapter 7?
