Car Loans and Northern Virginia Bankruptcy by Michael Strong mstrong@stronglawfirm.com Connect with me

Senior Attorney, Strong Law Firm If you have a car loan with a balance due at the time you file for Northern Virginia bankruptcy, your options for dealing with the remainder of that debt depends on your answers to these questions:

  • Can you make further payments on the Virginia car loan?
  • How much is the balance due?
  • For what kind of bankruptcy relief are you filing?


A standing car loan is considered a secured obligation. Regardless of what chapter of bankruptcy you file, if you want to keep the vehicle, then you need to stay current on the payments. 

Typically, you have three options in dealing with any secured obligation in bankruptcy cases:

  • Redemption: Paying off the remaining balance with cash upfront;
  • Reaffirmation: Committing to pay off the remaining balance; or
  • Surrender: Giving up the vehicle to the liquidation process.


The option you choose will depend on your specific situation.

Bankruptcy proceedings will not renegotiate the terms of any secured obligations, including car loans. Though bankruptcy will affect elements of the loan, there probably will be no noticeable changes for you.

Chapter 13 Bankruptcy and Car Loan Payments

If you file for Chapter 13 reorganization bankruptcy and plan to keep your vehicle, be aware that depreciation is not taken into account. If the car was purchased within 910 days (nearly two and a half years) before the bankruptcy filing, then you will be required to pay off the full outstanding balance.

For example, if the remaining balance on your vehicle loan is $7000 but the Kelley Blue Book value of your vehicle is estimated at only $2000, you still will be required to pay the full $7000 remainder. 

Chapter 7 Liquidation Bankruptcy and Standing Car Loans

Because of changes to bankruptcy law by the Bankruptcy Abuse Prevention and Consumer Protection Act, if you decide to reaffirm or redeem the remainder of your loan in a Chapter 7 bankruptcy case, then you also will need to pay the full loan amount without reduction for depreciation.

If you find yourself unable to keep making car loan payments, it still is possible to surrender the vehicle under Chapter 7 bankruptcy.

Due to the growing complexity of bankruptcy law, you will want to be fully informed of your options before entering into the process. Consider speaking with a Northern Virginia bankruptcy lawyer at the Strong Law Firm. We serve clients struggling with Virginia, District of Columbia, and Maryland debt. For a confidential and free case review, call us today at 887-344-8189 or use the quick contact form to reach us online.

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