Filing for Chapter 7 bankruptcy in Pennsylvania can provide much-needed financial relief, but many individuals worry about whether they can keep their car during the process. The answer depends on several factors, including the car’s value, any outstanding loan balance, and available bankruptcy exemptions.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a liquidation process that helps individuals discharge unsecured debts, such as credit card balances and medical bills. In return, non-exempt assets may be sold to repay creditors. However, bankruptcy laws allow individuals to protect certain essential assets through exemptions, including a vehicle.

Vehicle Exemptions in Pennsylvania

Pennsylvania does not have a specific motor vehicle exemption under state law, but filers can choose between state and federal exemptions. The federal exemption allows individuals to protect up to $4,450 in vehicle equity (as of 2024). Additionally, Pennsylvania residents may use the wildcard exemption, which permits protection of an additional amount in assets of their choice.

Factors That Determine If You Can Keep Your Car

1. Equity in the Car – If your car is worth less than the exemption amount or if you owe more on it than it’s worth, it is unlikely to be seized during bankruptcy.
2. Car Loan Status – If your car is financed, you may need to reaffirm the loan, meaning you agree to continue making payments to keep the vehicle. If payments are current, lenders may allow you to keep the car.
3. Wild Card Exemption – If the car’s equity exceeds the federal exemption, you may use a portion of the wildcard exemption to cover the difference and retain your vehicle.
4. Redemption Option – If you owe more on the car than its fair market value, bankruptcy law may allow you to pay a lump sum equal to the vehicle's value rather than the remaining loan balance.

What Happens If You Can’t Protect the Car?

If your vehicle’s equity exceeds the available exemptions, the bankruptcy trustee may sell it to pay creditors. In that case, you could use the proceeds to purchase a more affordable car. If your loan payments are too high, surrendering the vehicle might be the best financial decision, allowing you to discharge the debt.



At Tadross Law, we understand the stress of financial difficulties and can help Pennsylvania residents navigate bankruptcy while protecting important assets. If you are considering filing for Chapter 7, consult with an attorney to determine your best course of action.