What Happens If You File Bankruptcy With A Car Loan?

For the majority of my Chapter 7 bankruptcy clients, the answer is straightforward: the auto loan is affected by the bankruptcy. You likely have the option of keeping your car. Simply carry on making the required lease or loan payments.

It might be complicated what happens to the car loan in bankruptcy, but I believe I have a clear explanation.

Two documents must be signed when buying a car. The first is a promissory note, while the second is a lien on the title. The promissory note is your agreement to the lender that you will personally pay the debt owed on the car. The lien on the title is the guarantee the lender gets that you will pay back the loan.

When you file for bankruptcy and get a discharge, you no longer have a personal responsibility to pay for the automobile under the promissory note. The lien on the title, however, remains. This implies that if you surrender your car to the creditor, they can only take the vehicle and not require you to pay off the rest of the debt. If a client is upside down on their car or has previously rolled over negative equity in the purchase of the current vehicle, this might be a great tool for them.

A chapter 13 bankruptcy might require your lender to lower your interest rate or the principal amount owed on your automobile. You have the choice of keeping your vehicle at this lower payment, or you can surrender the vehicle to the creditor and receive a new car and loan.

Many of my chapter 13 clients use payment restructuring and interest rate reductions to make their automobiles more affordable and to free up revenue each month by reducing their payments.

Our team can assess your options and assist you in making the best decision for you and your family. The main fact is that if you want to keep your car, most individuals can, whether they file chapter 7 or chapter 13.


If you have any questions about the topic discussed in this article, or any bankruptcy law matter, please give us a call at Bononi & Company 724-832-2499.


The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

Privacy Policy

This privacy policy discloses the privacy practices for www.bononiandbononi.com. This privacy policy applies solely to information collected by this web site. It will notify you of the following:

  1. What personally identifiable information is collected from you through the web site, how it is used and with whom it may be shared.
  2. What choices are available to you regarding the use of your data.
  3. The security procedures in place to protect the misuse of your information.
  4. How you can correct any inaccuracies in the information.

Information Collection, Use, and Sharing 
We are the sole owners of the information collected on this site. We only have access to/collect information that you voluntarily give us via email or other direct contact from you. We will not sell or rent this information to anyone.

We will use your information to respond to you, regarding the reason you contacted us. We will not share your information with any third party outside of our organization, other than as necessary.

Unless you ask us not to, we may contact you via email in the future to tell you about specials, new products or services, or changes to this privacy policy.

Your Access to and Control Over Information 
You may opt out of any future contacts from us at any time. You can do the following at any time by contacting us via the email address or phone number given on our website:

  • See what data we have about you, if any.
  • Change/correct any data we have about you.
  • Have us delete any data we have about you.
  • Express any concern you have about our use of your data.

We take precautions to protect your information. When you submit sensitive information via the website, your information is protected both online and offline.

We also protect your information offline. Only employees who need the information to perform a specific job (for example, billing or customer service) are granted access to personally identifiable information. The computers/servers in which we store personally identifiable information are kept in a secure environment.


Our Privacy Policy may change from time to time and all updates will be posted on this page.

If you feel that we are not abiding by this privacy policy, you should contact us immediately via telephone at 412-832-2499