Owning a car for most people is a necessity not a luxury. Creditors hold important rights on a vehicle that is finances or leases. These rights are established by the lease or finance contract and are subject to state law. If you are behind in your car payments or default on your contract, the creditor may have the right to repossess your car without warning. Filing for bankruptcy protection under either Chapter 7 or Chapter 13 will help you save your car and may even allow you to recover the vehicle if it was repossessed before you filed for bankruptcy.

Under a Chapter 7 bankruptcy you have two options. You can renegotiate the terms of your loan while reaffirming your loan or through a 722 redemption allowed by federal bankruptcy law, you can refinance the loan at its current market value versus what is owed. If you opt to reaffirm the loan, you are entering into an agreement to continue to pay for the vehicle at either the existing payments or a renegotiated rate. If you qualify for a 722 redemption, you can enter into an agreement with the bank or finance company to pay the amount owed or the current fair market value. Since the current market value is likely to be less than the amount actually owed, a 722 redemption could save you thousands of dollars. If you qualify for a Chapter 13 bankruptcy, you may be able to lower your payments. During the dept reorganization period you can negotiate with the lender to reduce the interest payments or if you qualify, discharge a portion of your debt to help you catch up on missed payments. In order to avoid the risk of losing your car to repossession, it is important to contact a bankruptcy attorney as soon as possible if have defaulted or are about to default on a car loan or lease agreement.