Will I Lose My Car if I File Bankruptcy in Maryland?
Most people keep their car in bankruptcy. Maryland has no separate car exemption, so vehicle equity is protected using the wildcard. Learn how reaffirmation and redemption work.
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 has no separate vehicle exemption, so car equity is protected using the wildcard.
How Maryland Protects Your Car (and Why Most Sites Get This Wrong)
Maryland does not have a standalone motor vehicle exemption. There is no separate allowance reserved for your car. Maryland has also opted out of the federal exemption system, so the federal vehicle exemption is not available to you either, no matter what other websites say. What Maryland gives you instead is a wildcard exemption of up to $6,000 in cash or property of any kind. You can apply that wildcard to your car, but the same $6,000 has to cover anything else you point it at, so if you also need it for money in the bank or other property, it gets thin quickly. This is why vehicle equity has to be calculated before you file, not after.
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 has opted out of the federal exemption system. That means you cannot choose the federal exemptions, even if they would protect your car better. Some websites still say otherwise. They are wrong, and relying on that can cost you a vehicle. You use Maryland exemptions, and for a car that means the wildcard.
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.
