Do I have return my car if I file for bankrupcty?

Whether you can keep your car in bankruptcy depends on several factors, including what type of bankruptcy you file (Chapter 7 or Chapter 13), whether you're behind on your payments, how much you owe on the car, and what it's worth. Here's how it works.

Keeping a Car in Chapter 7

If you file for Chapter 7, the trustee can take any of your property that isn't protected by an exemption. State exemptions laws typically allow debtors to keep basic and necessary property, which often includes at least some equity in a vehicle. (For more on exemptions generally and links to each state's exemptions, see Bankruptcy Exemptions - What Do I Keep When I File for Bankruptcy?)

If you don't have any equity in your car (that is, you owe as much as or more than it's worth) or your equity is protected by an exemption, the trustee won't take your car. In this situation, there wouldn't be anything left, after paying off your car note and the costs of taking and selling the car, to give anything to your other creditors. 

This isn't the end of the story, however. In your Chapter 7 case, you must tell the trustee how you plan to handle your secured debts, including your car loan. Your personal liability to repay these debts is typically discharged in bankruptcy. However, the creditor still has the right to take back the property if you're behind on your payments. If you want to keep the car, you may have to enter into a reaffirmation agreement with the creditor, agreeing that you will continue to owe the debt after your bankruptcy case. If the creditor agrees, you might be able to keep the car as long as you get and stay current on your payments. 

Keeping a Car in Chapter 13

It's generally easier to keep a car in Chapter 13. You don't have to give up any property in Chapter 13. Instead, you pay off some or all of your debt through a repayment plan. If you have missed some car payments, you can roll them into your plan and pay them off a little each month. As long as you stay current on your monthly payments, you can hang on to your car. You may even be able to cram down your car loan, reducing the amount you owe to the value of the car.