If you’re here, you might be going through a tough time. You may be feeling worried about money, unsure of your future, and confused about what happens next. That’s completely normal. If you’re thinking about filing for Chapter 7 bankruptcy in Texas or already have, you’re likely asking yourself, “What happens to my car?” This is one of the most common questions people have when starting this process. We understand this isn’t just about paperwork—it’s about your life. Your car may be how you get to work, take your kids to school, and handle your day-to-day needs. So what happens to it matters.
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What Chapter 7 Bankruptcy Means in Texas
Chapter 7 bankruptcy is a legal way to get rid of many debts when you can’t pay them anymore. It is often called a “liquidation” because some of your property might be sold to pay off your debts. But don’t worry—this doesn’t mean everything gets taken away from you. In fact, Texas law is more generous than many other states when it comes to what you get to keep. The law gives you what are called “exemptions.” These are items that you can protect during bankruptcy, and a car is often one of them.
Texas Vehicle Exemption and Why It Matters
In Texas, you can usually keep one car for every licensed driver in your household. That means if you and your spouse both drive, you can each protect one car. This is thanks to the Texas vehicle exemption. The law lets you keep the full value of your vehicle, no matter how much it’s worth, as long as it fits within your personal property exemption. That means if the car is paid off or doesn’t have much value beyond what you owe, you can likely keep it.
But it’s important to understand how this works. If your car is worth more than the allowed exemption and you have a lot of other property, you might face a choice. The bankruptcy trustee, who handles your case, may want to sell your car and use the money to pay creditors. However, this isn’t always the case, and many times people get to keep their vehicles, especially if the car isn’t worth much or if you owe more than it’s worth.
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What Happens If You Still Owe Money on Your Car
Many people still have a car loan when they file for bankruptcy. If that’s your situation, the next steps depend on what you want to do and what you can afford. You have a few options.
First, you can choose to “reaffirm” the loan. This means you agree to keep making payments on your car loan, even after bankruptcy. If you’re current on payments and want to keep the car, this is a good choice for many people.
Second, you can “redeem” the car. This means you pay the current value of the car in one lump sum, not what you owe on the loan. This is helpful if your car is worth much less than what you still owe, but you have the cash to pay off the value.
Third, you can “surrender” the car. If you can’t afford the payments or the car is not worth keeping, you can give it back to the lender. Then you are no longer responsible for the debt tied to that car. This can be a hard decision, but it can also give you a fresh start.
How the Trustee Looks at Your Car
The trustee is the person who reviews your bankruptcy case. Their job is to see if there’s any property that can be sold to pay off some of your debt. They will look at the value of your car, whether it’s paid off, and whether it fits within the exemptions allowed in Texas.
If your car has no equity—or if the value is protected by the exemption—then the trustee likely won’t touch it. But if the car is worth a lot more than what you owe on it and your exemption doesn’t cover the difference, the trustee might want to sell it. That’s why knowing how much your car is worth and how much you owe is so important.
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These guys are amazing. They made a most horrific experience bearable. They treated me with respect and no judgment. I cannot describe how grateful I am for their representation with my case. 5 stars is not enough. I hope I never need them again but would ABSOLUTELY use them again and definitely recommend them.
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What If Your Car Is Leased
Sometimes people lease cars instead of buying them. If you have a lease, the choice is simple. You can either keep the lease and keep making payments, or you can return the car and walk away from the lease. Just like with a car loan, it’s your choice.
Reaffirming the Loan Can Be a Big Step
Reaffirming a loan means you’re agreeing to keep paying on your car loan even though you’re going through bankruptcy. This decision needs to be made carefully. If you miss future payments after reaffirming the loan, the lender can still come after you, even though you filed bankruptcy. That’s why it’s important to be sure you can afford the payments before you sign anything. Sometimes, judges may want to see proof that you can make the payments before they approve a reaffirmation.
How to Know What’s Best for You
Every person’s case is different. Some people want to keep their car because they need it to get to work or care for family. Others want to get out from under a bad loan or stop worrying about expensive car payments. What’s right for one person might not be right for another.
That’s why it’s important to talk to someone who understands how Texas law works. You need someone who can help you look at your whole situation—not just your car. This includes your debts, your income, your family needs, and your goals.
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What If You’re Behind on Payments
If you’re behind on your car payments when you file Chapter 7, you’ll need to catch up quickly if you want to keep the car. The lender may ask the court for permission to take back the car. If that happens, and you haven’t made arrangements to keep it, they may be allowed to repossess it even during the bankruptcy.
That’s why timing matters. Filing before you fall too far behind can make it easier to keep the car. Once you file bankruptcy, a rule called the “automatic stay” stops most collection efforts. That means the lender can’t repossess your car without permission from the court, giving you time to figure out what to do.
What If You Use Your Car for Work
In Texas, you may also be able to protect a car used for work if it’s considered “tools of the trade.” This means if you use your car every day as part of your job—like as a contractor, delivery driver, or rideshare driver—it may get extra protection. This can make a big difference in your case. It’s another reason why the details of your life really matter when filing.
Your Car and a Fresh Start
A car can mean freedom, responsibility, and a way to move forward. When you’re thinking about bankruptcy, it’s natural to worry about losing your car. But many people are surprised to learn that they can keep their vehicles and still get a fresh start.
The key is knowing your rights, understanding how the law works in Texas, and getting the right help to make a plan that fits your life. The good news is that you don’t have to figure this out alone.
We’re Here to Help You Move Forward
If you’re worried about what will happen to your car in a Texas Chapter 7 bankruptcy, you’re not alone. Many people just like you are feeling the same way. But with the right guidance, you can protect what matters most and take the first step toward a better future.
At Zendeh Del & Associates PLLC, we’re here to help. We take the time to listen, answer your questions, and help you find the best path forward. We know this is more than just a legal case—it’s your life, your car, and your peace of mind. If you’re ready to take control and get the support you need, reach out today. Let’s take the next step together.