Bankruptcy Car Loans: What Happens To My Car Loan When Filing Bankruptcy?

Though car loans tend to be harder to write off than other types of loans, there are several tips and information that will help you determine how to handle your car loan during a bankruptcy case.

Under Chapter 13 bankruptcy debtors are required to pay the lender the retail value of replacement for the car. This value is generally quite higher than the private sale value of the car as was used for prior cases like these. It is still possible for a debtor to give up a car if keeping up the payments on it would be impossible.

It can also be somewhat difficult to reassume a car loan once it has been assigned to the bankruptcy trustee on your bankruptcy case.

In a Chapter 7 bankruptcy case it is possible to assume a personal property base, such as an automobile. The car loan will be deemed rejected if the bankruptcy case trustee does not assume the loan within sixty days after bankruptcy has been filed.

If the debtor wishes to take responsibility for a car loan once it has been the trustee’s responsibility, the creditor will be notified. The creditor then can decide whether or not to let the debtor regain possession of the car loan.

For the most part debtors are required to either surrender their car, use redemption or reaffirmation as means to again own and take full responsibility for their car loan and repayment terms.