One of the most common concerns for Texans considering Chapter 7 bankruptcy is whether they’ll be able to keep their car. The idea of losing your vehicle—which may be essential for getting to work, school, or medical appointments—can make the decision to file feel overwhelming. Fortunately, the answer in many cases is yes.

At Shuster Law, PLLC, we help Texas residents understand how the law protects certain property in bankruptcy. Here’s what you need to know about keeping your car when filing for Chapter 7 in Texas.

Understanding Chapter 7 and Property Exemptions

Chapter 7 bankruptcy is often referred to as “liquidation” bankruptcy because the court may sell non-exempt property to pay back creditors. However, Texas offers some of the strongest property exemptions in the country. These exemptions allow many people to retain important assets—including their vehicle.

Texas Motor Vehicle Exemption

Texas law permits you to exempt the full value of one motor vehicle per licensed household member (or per person who depends on someone else to operate a vehicle for them). There’s no dollar limit, meaning even a fully paid-off vehicle with high value can often be protected.

Examples:

• A single filer with one car can likely keep it.
• A couple filing jointly with two cars may keep both, provided each spouse has a driver's license.
• A parent with a disabled child may exempt a vehicle used for that child's transportation needs.

What If You’re Still Making Payments?

If your car is financed (i.e., you're still paying off a loan), you have a few options:

1. Reaffirm the Loan: You agree to continue making payments and keep the car. This helps preserve your credit but keeps you liable for the loan.
2. Redeem the Vehicle: You pay the current market value in a lump sum—usually less than what you owe.
3. Surrender the Car: If keeping the car isn’t feasible, you can return it and eliminate the debt.

When You Might Lose Your Car

There are some circumstances where a car could be at risk in Chapter 7:

• You own multiple vehicles that exceed the exemption limits.
• You are behind on payments and can’t catch up.
• Your car has significant equity that can’t be fully exempted.

In such cases, the bankruptcy trustee might sell the car and use the proceeds to pay creditors. However, this is relatively rare thanks to Texas’s generous exemptions.

Shuster Law, PLLC Can Help You Protect What Matters

At Shuster Law, PLLC, we work with clients across Texas to ensure they understand their rights and options when filing for Chapter 7. Whether you own your car outright or are still making payments, our legal team can help you take the best approach to protect your vehicle and relieve your debt.