Can I Keep My Car If I File for Chapter 7 Bankruptcy in Maryland?

Filing for bankruptcy is never an easy decision. For many Maryland residents, one of the biggest concerns when considering Chapter 7 bankruptcy is whether they’ll be able to keep their car. After all, a vehicle is more than just a convenience — it’s often essential for getting to work, transporting family, and managing everyday responsibilities. At Sirody Bankruptcy Center, we understand the importance of this question for our clients, and the answer depends on several factors, including the value of your car, the amount you owe, and how Maryland’s exemption laws apply to your situation. In this post, we’ll break down everything you need to know about keeping your car during a Chapter 7 bankruptcy in Maryland, so you can make an informed decision about your financial future.

Understanding Chapter 7 Bankruptcy in Maryland

Structured to help those struggling with significant unsecured debt, Chapter 7 bankruptcy allows you to eliminate the majority of credit card, medical bill, and personal loan obligations. In exchange, a bankruptcy trustee may sell some of your assets to repay creditors, but don’t let that worry you! Chapter 7 bankruptcy offers the opportunity to protect certain property, potentially including your vehicle.

In Maryland, debtors must use Maryland state exemptions instead of federal exemptions, which play a critical role in determining whether you can keep your car.

How Car Ownership Affects Bankruptcy

Before diving into exemptions, it’s important to understand how the status of your car ownership affects your bankruptcy case. If you own your car outright (meaning you don’t have a loan or lease), your appointed trustee will look at its fair market value. If its value is higher than the available exemptions, your car may be in jeopardy of being sold. However, in practice, most people’s cars can be protected from liquidation.

In the case that you do have a car loan, you will have to continue making your loan payments if you want to keep the vehicle. Chapter 7 does not eliminate secured debts like car loans unless you surrender the property. That means you will need to decide whether to reaffirm the loan, redeem the vehicle, or surrender it.

Maryland Exemptions That Can Protect Your Vehicle

Understanding the exemptions available under Maryland bankruptcy laws is important when determining what property you can protect from liquidation. Here’s how they apply to vehicles:

The Motor Vehicle Exemption

Maryland allows an exemption specifically for motor vehicles. You can protect up to $5,000 of equity in one motor vehicle. Equity is the difference between your car’s market value and the amount you still owe on it. For example, if your car is worth $9,000 and you still owe $6,000, your equity is $3,000 — which falls safely within the exemption limit.

The Wildcard Exemption

Maryland also offers a “wildcard” exemption, which allows you to exempt up to $6,000 in cash or property of any kind. If your vehicle’s equity exceeds the $5,000 motor vehicle exemption, you may be able to use part of this wildcard exemption to protect the rest of your equity.

The Tenancy by the Entirety Exemption

For married couples who jointly own property, Maryland recognizes tenancy by the entirety exemptions. This can sometimes help protect assets like vehicles if they are titled jointly and creditors are pursuing only one spouse. However, this is a more complex exemption and typically requires legal guidance to use effectively.

What If You’re Still Making Car Payments?

For Maryland residents with an auto loan, keeping your car comes down to whether you can continue making payments and whether you want to keep the loan. These are the options available to you if your car is still tied to an auto loan:

Reaffirming the Loan

Reaffirmation means you agree to continue being personally liable for the car loan despite the bankruptcy. If you’re currently making payments and can afford them going forward, reaffirming the loan allows you to keep your car. However, this also means that if you later default, the lender can repossess the car and pursue you for any remaining balance.

Redeeming the Vehicle

Another option is redemption, which allows you to pay the lender the car’s current fair market value in a lump sum. This is often difficult for most debtors, but it can be beneficial if your car is worth significantly less than what you owe.

Surrendering the Vehicle

If the payments are too high or the car is in poor condition, you may choose to surrender the vehicle. This relieves you of the loan obligation, and any remaining balance after the car is sold is discharged in your Chapter 7 case.

Practical Considerations for Maryland Residents

While the law provides a framework for bankruptcy filing, real-world outcomes often depend on your personal situation. For example, a modestly valued car that you rely on to get to work is more likely to be protected than a luxury vehicle. Judges and trustees recognize that taking away reliable transportation could prevent you from earning income, which would defeat the purpose of offering a financial fresh start.

It’s also important to note that the valuation of your car matters. Bankruptcy trustees typically use sources like the Kelley Blue Book to determine fair market value, but factors like mileage, condition, and recent repairs can make a significant difference.

What Happens If Your Vehicle Exceeds the Exemption?

In cases where your vehicle’s equity exceeds the available exemptions, the bankruptcy trustee may consider selling the car to pay creditors. However, this is not always the outcome. Trustees often factor in costs of sale, administrative expenses, and whether the sale would result in meaningful funds for creditors. If selling the car wouldn’t provide much benefit, the trustee may allow you to keep it. Additionally, many clients can negotiate with the trustee to “buy back” the non-exempt portion of their equity, often through a payment plan.

Why Professional Legal Guidance Matters

Bankruptcy laws are complex, and making the wrong decision could cost you your car or leave you with ongoing debt. Partnering with a law firm that specializes in bankruptcy can be the difference between a bankruptcy filing that puts you back on track to rebuilding your credit and a filing that leaves you still struggling to find financial stability.

Our attorneys at Sirody Bankruptcy Center have decades of combined experience helping Maryland residents navigate Chapter 7 bankruptcy. We carefully review your financial situation, calculate exemptions, and develop a strategy to protect essential property like your vehicle. Whether it’s correctly structuring exemptions, negotiating with trustees, or advising on whether to reaffirm a car loan, our attorneys provide the guidance and advocacy you need to make informed choices.

Protect Your Vehicle and Your Future

Your car doesn’t have to be something you lose when you file for Chapter 7 bankruptcy. The key to keeping it is understanding how exemptions work, evaluating your loan status, and making informed decisions about reaffirmation or surrender. With the right legal guidance, you can protect your vehicle while gaining the fresh financial start you deserve.

If you’re considering bankruptcy and want to know how it may affect your car or other property, Sirody Bankruptcy Center can help you understand your options and guide you through every step of the process. We are committed to helping our clients keep the assets that matter most while eliminating the burden of overwhelming debt. Our experienced attorneys will provide clear, practical advice tailored to your situation, so you can move forward with confidence. Contact us today to schedule your consultation.