Keeping Your Car in Chapter 7 and Chapter 13
Losing the car usually means losing the job, so bankruptcy law gives filers several distinct paths to keep a vehicle — whether it's paid off, financed, or worth less than the loan. Which path applies depends on your equity, your loan, and the chapter you file.
The motor vehicle exemption
If the car is paid off, the motor vehicle exemption protects equity up to the statutory cap — in Arizona under A.R.S. § 33-1125, with a higher cap for filers with disabilities. Equity within the cap means the trustee has no claim on the vehicle at all.
Financed cars: reaffirm, redeem, or surrender
With a loan on the car, Chapter 7 filers choose to reaffirm (keep the loan and keep paying), redeem (pay the lender the car's current value in a lump sum and own it free), or surrender it and discharge the balance. Each option has real trade-offs an attorney should walk through before the deadline to file the Statement of Intention.
Chapter 13 cramdown
Chapter 13 offers a tool Chapter 7 doesn't: on loans older than 910 days, the plan can 'cram down' the secured claim to the car's actual value and often lower the interest rate, with the remaining balance treated as unsecured. For a car worth far less than its loan, this can save thousands.
Exemption amounts and rule thresholds change on statutory schedules. See our monthly rule reports for the current figures with citations to the official sources.
Need help protecting what you've worked for?
Majors Law Group, P.C. — an independent bankruptcy firm running its practice on Bankruptcy.AI — handles Chapter 7 and Chapter 13 cases in Arizona and Washington.
Bankruptcy.AI is a technology platform, not a law firm, and does not provide legal advice. Majors Law Group, P.C. is a separate, independent law firm. This page is general information and is not legal advice; outcomes depend on your specific facts.