Can I Keep My Car? Can I Surrender My House in Bankruptcy?

Introduction

When filing bankruptcy, two of the most pressing questions are:

1. Can I keep my car?

2. Can I surrender my house?

The good news is, bankruptcy gives you flexibility. You can often keep the property you need (like your car) and walk away from burdensome property (like a house you can’t afford). Here’s how it works.

Keeping Your Car in Bankruptcy

Whether you keep your car depends on:

1) Equity and Exemptions

• Equity = car’s value minus loan balance.

• If your state exemption covers all equity, you keep the car.

• If equity exceeds the exemption, the trustee may sell it in Chapter 7 (though buy-back deals are sometimes possible).

2) Loan or Lease Options

• Reaffirmation Agreement: Continue your loan on the same terms.

• Redemption (Chapter 7): Pay the car’s current market value (not full loan balance).

• Surrender: If payments are too high, you can give up the car and discharge the debt.

3) Chapter 13 Option

• If you’re behind on payments, Chapter 13 allows you to catch up over 3–5 years.

Surrendering Your House in Bankruptcy

If your home has become a financial burden, you can surrender it in bankruptcy.

• How It Works: You notify the court and your lender that you’re giving up the property. The lender then forecloses and takes it back.

• Debt Wiped Out: Any mortgage balance left after foreclosure is discharged.

• Chapter 7 or 13: Both allow surrender, but Chapter 13 may give you more time to transition out of the property.

Strategic Combinations

• Keep Car, Surrender House: Common for people who need reliable transportation but no longer want to carry the costs of homeownership.

• Keep House, Surrender Car: Less common, but possible if your home is affordable and your car loan is overwhelming.

Conclusion

Bankruptcy gives you control. You can often keep the property you truly need (like your car) and surrender property that no longer makes sense (like a house you can’t afford). The right decision depends on your budget, exemptions, and long-term goals. A bankruptcy attorney can help you make the most strategic choice.