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Why You Shouldn't Surrender Your Car in Chapter 13 Bankruptcy

Why You Shouldn't Surrender Your Car in Chapter 13 Bankruptcy

Can you no longer afford to pay all of your debts? Are you considering filing for bankruptcy but not sure what will happen to your car? When you file for bankruptcy, you will have the chance to cancel your installment contract and surrender secured collateral (your car). So if you file for Chapter 7 and decide to surrender your motor vehicle, it will end your obligation to that particular creditor. The remaining deficiency you owe will be counted as unsecured debt, which is usually dischargeable in Chapter 7.

However, if you have too much equity due to your property value, you will likely have to file Chapter 13 bankruptcy. In Chapter 13, surrendering your secured collateral doesn’t mean you’re done with the creditor. After you surrender your vehicle, the creditor can file a deficiency claim that allows them to sell your vehicle and still recover money from you. This means your repayment plan will be significantly higher if you surrender the car in bankruptcy.

Surrendering your vehicle can also result in delays to your bankruptcy case. If the creditor doesn’t respond in a timely manner and attempts to stall the surrendering of the vehicle, your case can be put on hold because you won’t be able to submit your final list of claims to the court.

Consult with a Bankruptcy Lawyer

If you want to file bankruptcy, you should consult with one of our dedicated lawyers at Bach Law Offices, Inc. to discuss whether it is in your best interest to surrender your motor vehicle to your creditors. We can assess your situation and build a strong legal strategy that will eliminate your debts. We know how stressful the bankruptcy process can be, which is why we are here to stand by your side each step of the way.

To schedule your case consultation, call us today at (847) 448-0025 to speak with a lawyer at our firm.


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