Filing a Chapter 7 bankruptcy can be used to save your car under limited circumstances, but it is possible. In Chapter 7, a debtor only has three options when it comes to deciding what do to with their personal property covered by a lien. Once you and your bankruptcy attorney decide which option is best, your attorney will file a “Statement of Intention” with the bankruptcy court to let everyone know what your intend to do with regard to your secured collateral. Here are your options:
The first option is to surrender the property to the car lender in full satisfaction of the debt. The car lender can never come after you for the difference between what the car sold at auction and what you owe on the note. In normal situations, if you owe $10,000 on a car that gets repossessed, and the lender can only get $6,000 for it at auction, the car lender can sue you for the remaining $4,000 on the note. Because a Chapter 7 bankruptcy wipes out your personal liability on your debts, your lender will never be able to come after you for the deficiency.