Keeping Your Car in Chapter 7 Bankruptcy in Alabama

Why Your Vehicle Matters

If you are considering filing for Chapter 7 bankruptcy, it is completely normal to worry about how you will get to work, buy groceries, or pick up your kids. In the Pelham and greater Birmingham metro area, a car isn’t a luxury—it’s an absolute necessity.

• Most people who file for Chapter 7 bankruptcy are able to keep their primary vehicle.
• Below is a clear breakdown of how the process works in Alabama.

Understanding Vehicle Protection in Chapter 7

How Equity and Exemptions Work

When you file for Chapter 7 bankruptcy, a court‑appointed trustee reviews your assets to determine whether anything can be sold to pay creditors. Fortunately, Alabama law protects essential personal property through exemptions.

The Alabama Wildcard Exemption

• Alabama does not offer a specific motor‑vehicle exemption.
• Instead, the state provides a personal property wildcard exemption of up to $9,400 per person (or up to $18,800 for married couples filing jointly).
• This wildcard can be applied to the equity in your vehicle.

Understanding Equity

Equity is the market value of your car minus what you still owe on the loan.

Example:

• Car value: $15,000
• Loan balance: $10,000
• Equity: $5,000
• Because $5,000 is below the $9,400 exemption, the car is fully protected.

Keeping a Car With an Active Loan

If You Are Current on Payments

• You can typically sign a Reaffirmation Agreement.
• This agreement states that you will continue paying the loan and remain responsible for it even though other debts are discharged.

If You Are Behind on Payments

• Chapter 7 does not provide a way to catch up on missed payments over time.
• Filing triggers an automatic stay, which temporarily stops repossession.
• To keep the car long‑term, you must:
  • Bring the loan current quickly, or
  • Consider filing Chapter 13 instead.

Keeping a Car That Is Fully Paid Off

When Your Car Is Owned Free and Clear

• Your vehicle is protected as long as its retail value is below the $9,400 wildcard exemption.
• If the car is worth more than the exemption, or if you own multiple vehicles, a local bankruptcy attorney such as Brent W Davis and Associates in Pelham can help you explore legal strategies to protect them.

Take the Next Step with Confidence

Why Professional Guidance Matters

Bankruptcy is designed to give you a fresh financial start, not to leave you stranded without transportation. Because every financial situation is unique, consulting Brent W Davis and Associates in Pelham is the safest way to map out your specific assets and ensure your keys stay right in your pocket.