Losing your vehicle is one of the biggest fears when considering bankruptcy. The good news: most people keep their cars. Your options depend on which side of the state line you live on and which chapter you file.
$3,000
Per person vehicle exemption (RSMo 513.430)
Example: Car worth $10,000, you owe $8,500. Equity = $1,500. Fully protected under the $3,000 exemption.
$20,000 / $40,000
Single / married vehicle exemption (K.S.A. 60-2304)
Example: Car worth $25,000, you owe $10,000. Equity = $15,000. Fully protected under the $20,000 exemption.
In Chapter 7, you have three main options for a vehicle with an outstanding loan:
In Chapter 13, you have a fourth option that can be extremely valuable: the cramdown.
If you purchased your car more than 910 days (approximately 2.5 years) before filing bankruptcy, you can "cram down" the loan balance to the car's current fair market value. You pay only what the car is actually worth through your Chapter 13 plan, at a court-approved interest rate (typically prime rate plus 1-3%). The remaining balance is treated as unsecured debt and may be partially or fully discharged.
| Without Cramdown | With Cramdown | |
|---|---|---|
| Amount owed on car | $18,000 | $18,000 |
| Car's fair market value | -- | $10,000 |
| Amount you pay for the car | $18,000 | $10,000 |
| Savings | -- | $8,000 |
The 910-day rule (sometimes called the "hanging paragraph" of 11 U.S.C. section 1325(a)) prevents cramdown on vehicles purchased within 910 days of filing. If your vehicle was purchased within that window, you must pay the full loan balance through your plan. This rule is one reason timing matters when planning a Chapter 13 filing.
If you are behind on car payments and facing repossession, Chapter 13 can help:
Important: If your car has already been repossessed, you may be able to get it back if you file bankruptcy quickly -- typically within a few days before the lender sells it. Time is critical.
In most cases, yes. Missouri protects up to $3,000 of vehicle equity. Kansas protects up to $20,000 (single) or $40,000 (married). If you owe more than the car is worth, your equity is protected regardless. In Chapter 13, you can keep your car and catch up on payments through your plan. Learn more at keepmycarinbankruptcy.com.
Missouri allows a $3,000 per person vehicle exemption under RSMo 513.430. You can also use the $600 wildcard exemption plus unused homestead exemption for additional protection. See all Missouri exemptions.
Kansas allows a $20,000 vehicle exemption for single filers and $40,000 for married couples under K.S.A. 60-2304. This is one of the most generous in the country. Most KC-area Kansas residents keep their vehicles easily.
A reaffirmation agreement is a new contract with your car lender that keeps you personally liable for the debt after bankruptcy. You continue making payments and keep the car. It must be filed before discharge and approved by the court if you are unrepresented.
Redemption under 11 U.S.C. section 722 lets you keep your car by paying its current fair market value in a single lump-sum payment, even if you owe more. Specialized redemption lenders can finance this payment.
If you purchased your car more than 910 days before filing Chapter 13, you can reduce the loan to the car's fair market value. You pay only what the car is worth through your plan at a court-approved interest rate. The rest is treated as unsecured debt.
Visit our dedicated resource for a comprehensive guide to vehicle protection in bankruptcy.
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