Will I Lose My Car if My Chapter 13 Is Dismissed?

By Heather Frances J.D.

Vehicles are one type of asset the court can address during Chapter 13 bankruptcy, but a dismissal won’t necessarily affect your ownership of a vehicle that has been paid off. Since the only creditor who can repossess your vehicle is the one who holds the loan on it, none of your other creditors can take your car. However, if your case is dismissed, you may have to sell some of your assets, including your car, to raise the cash to pay your remaining debts.

Chapter 13

Chapter 13 bankruptcy allows the debtor to restructure his debt by obtaining court approval for a three or five year repayment plan. If the debtor makes the payments as scheduled, any remaining debt will be discharged at the end of the repayment period. Once the debtor’s Chapter 13 case is filed, creditors are prohibited from collection actions against the debtor, including foreclosures or repossessions. Many debtors choose to file Chapter 13 specifically because they don’t want to lose their homes or cars.

Past and Future Payments

Past due auto payments are typically included in the debtor’s repayment plan, but he must keep up with current payments during the life of the plan. Since a vehicle loan is a secured debt, the repayment plan must provide that the lender receives at least as much in payments as the vehicle is worth. However, if the loan was made within certain time frames before filing, the repayment plan must provide for full payment of the loan, not just the value of the vehicle.

Get a free, confidential bankruptcy evaluation. Learn More


A Chapter 13 case may be dismissed voluntarily by the debtor, but it can also be dismissed by the court if the debtor fails to keep up with his repayment plan. If the debtor falls behind because of a hardship like a serious illness that interferes with the debtor’s ability to work, the court may issue a hardship discharge, which means the debtor will receive a discharge of his remaining debt without having to complete the repayment plan. Otherwise, the debtor will not receive a discharge if his case is dismissed.

Automatic Stay

If your case is dismissed, the automatic stay that protected you from collection actions is lifted. This means your creditors can resume efforts to collect on your debts. If you are still past due on your vehicle payments, they are still considered due and your lender can repossess your vehicle. If you have paid off your loan before your case is dismissed, none of your creditors will be able to repossess your vehicle since there is no loan on it.


If you are worried about losing your car if your Chapter 13 case is dismissed, you have options that will allow you to keep your it. For example, you can pay off your past due balance and keep your car loan current. You’ll still have a loan on your vehicle but if your payments are current, your lender cannot repossess your car. Alternatively, you could potentially prevent the dismissal before it happens by modifying your repayment plan. If you qualify, you could convert your Chapter 13 case to a Chapter 7 case and then reaffirm the car loan, which exempts the loan from discharge during the Chapter 7 case, thereby allowing you to keep the vehicle if you keep making payments on the loan as originally scheduled.

Get a free, confidential bankruptcy evaluation. Learn More
What Happens When You Reaffirm a Vehicle After Bankruptcy?


Related articles

What Happens if I Can't Make My House Payments in Chapter 13 Bankruptcy?

Chapter 13 bankruptcy can give you a financial clean slate by erasing certain debts and giving you a chance to catch up on your payments. However, your mortgage is generally not one of the debts erased by bankruptcy. If you cannot stay current with all your house payments during your Chapter 13 bankruptcy, your lender can foreclose on your home.

Can They Take My Car in a Private Bankruptcy in the US?

The vast majority of consumers file for bankruptcy under Chapter 7 or Chapter 13. Chapter 7 bankruptcy allows the court to sell any item that is not exempt under the bankruptcy laws and to distribute the proceeds from that sale to the debtor’s unsecured creditors. Chapter 13 requires debtors to make monthly payments to pay down the debts owed. The Chapter 7 process takes approximately 90 days to complete, while the Chapter 13 process typically takes between 3 and 5 years. At the end of both processes, all but certain legally excepted debts will be discharged. Since Chapter 13 involves paying down debts, you are most at risk of losing your car under Chapter 7. However, there are some ways of holding onto it.

Bankruptcy Laws Regarding Mortgage

Bankruptcy allows debtors to get some relief from a debt load they cannot otherwise overcome, but it doesn't always allow them to keep their assets. Mortgage lenders have rights even while the homeowner is going through bankruptcy. Depending on the type of bankruptcy a debtor files and how much equity he has in his home, he may lose his home during the bankruptcy process.


Related articles

Three Options to Protect Your Car in a Bankruptcy

If you're facing Chapter 7 bankruptcy, you may lose your car. However, depending on where you live and your personal ...

Can I Go Bankrupt & Keep My House if It's in Foreclosure?

If you've fallen behind on your mortgage payments, catching up may prove challenging. Not only do mortgage companies ...

How Does Bankruptcy Affect Homebuying?

Bankruptcy can give you a fresh financial start by allowing you to restructure or erase your debts under a ...

Can You Refuse to Reaffirm a Second Mortgage During Bankruptcy?

Although you've filed for bankruptcy, it is still possible to keep your home despite having a second mortgage on the ...

Browse by category
Ready to Begin? GET STARTED