Vehicle repossession is one of the first things people worry about when considering bankruptcy. The good news for Texas residents is that keeping a car in bankruptcy in Texas is possible in most cases — and often easier than people expect. Whether you are working with a bankruptcy attorney in Corpus Christi or anywhere else in the Southern District, understanding how the vehicle exemption works before you file puts you in a much stronger position.
How the Texas Vehicle Exemption Works
Texas law allows each licensed driver in a household to exempt one motor vehicle from the bankruptcy estate. The exemption applies to your equity in the vehicle — the difference between its current market value and what you still owe on the loan. Because vehicles are classified as personal property in Texas, they fall under the broader personal property exemption cap of $50,000 for individual filers and $100,000 for joint filers under Texas Property Code § 42.002.
In practice, this means most financed vehicles are well within the exemption. If you owe $18,000 on a car worth $20,000, only $2,000 in equity needs to be covered — which is rarely a problem. A debt relief attorney can calculate your exact equity position before you file.
Your Options for a Financed Vehicle in Chapter 7
If you still have a loan on your vehicle and want to keep it through Chapter 7, you generally have three options:
Reaffirmation: You sign a new agreement with your lender committing to continue paying under the original loan terms. The debt is excluded from your discharge, meaning you remain personally liable. As explained by the U.S. Bankruptcy Court’s overview of reaffirmation agreements, court approval is required, and the agreement must be filed within 60 days of the first creditors’ meeting. Only agree to reaffirm if you can genuinely afford the payments going forward.
Redemption: You pay the lender the vehicle’s current fair market value in a lump sum, which can be less than what you owe. This discharges the remaining balance but requires cash upfront — often difficult for someone already in financial distress.
Retain and pay: In some cases and with certain lenders, you can continue making payments without formally reaffirming. This carries some risk since the lender is not contractually bound to let you keep the vehicle.
How Chapter 13 Protects Your Vehicle
For anyone who has fallen behind on car payments, keeping a car in bankruptcy in Texas is often easier through Chapter 13 than Chapter 7. Under a Chapter 13 repayment plan, missed payments can be caught up over three to five years while the automatic stay prevents repossession throughout the entire process. This makes Chapter 13 a strong option for anyone who has received a repossession notice but has not yet lost the vehicle.
There is Help
At the Law Office of Joel Gonzalez, we have a track record of high client satisfaction, helping individuals across the Southern District of Texas protect their vehicles through bankruptcy. If you are facing repossession or have questions about how a bankruptcy lawyer can help you keep your car, contact our office today to discuss your options.
