Can I Keep My Car If I File for Bankruptcy?

What happens to my vehicle, if I file for bankruptcy?

Many people worry about whether their car will be taken away if they declare bankruptcy.

A concern that is not altogether unfounded or unreasonable.

After all, we need our vehicles to live our regular lives.

It is also the case that some cars are repossessed or claimed by the bankruptcy trustee during this process.

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However, this certainly doesn’t happen in every single case.

In fact, two main factors affect whether you get to keep your car or not.

The first is whether you own your vehicle, or if there is still an outstanding loan on it.

While the second is how much your car is worth if you do own it.

Keep reading to find a detailed rundown of both these situations and how they can play out.

A car loan means you keep your vehicle.

You might naturally assume that if you have a car loan debt and then file for bankruptcy, your vehicle will be on the line.

However, the opposite is true.

This is because most car loans come as secured contracts.

That is, the cost of the loan is secured against the value of the car.

Something that means it won’t be covered by the bankruptcy agreement, and therefore as long as you keep up your payments, you are in no danger of losing your car.

However, you can take action to have the debt on your vehicle covered by your bankruptcy agreement if you choose to.

Something that may be appropriate if you are concerned that you won’t be able to pay it off.

The way to do this is to sell the vehicle to pay off the loan.

Then if you had any additional debt left on the loan, it would become unsecured and so able to be covered by your bankruptcy agreement.

Although to do this, you would need the go-ahead from your car loan lender.

Everything would need to be done and dusted before you declare yourself bankrupt as well.

Car loans during bankruptcy

There is another advantage to having a car loan during bankruptcy, as well as just getting to keep your vehicle.

It is that it can help to improve your credit too.

Of course, this can be valuable, indeed.

The reason being that bankruptcy can harm your credit rating for 7-14 years after it’s completed.

Therefore, by keeping your loan open and paying it regularly and on time, you can help to minimise the damage to your credit rating and get back to financial normalcy faster.

What happens when you own your car

The situation is a little different if you own your vehicle, though.

This is because it will be counted as an asset, and so could be vulnerable to being used to help pay off your creditors.

However, it is essential to remember that this is not the case for every vehicle.

In fact, your car must be worth over the amount that your province defines as a limit.

For example, in British Columbia and Alberta, your vehicle only needs to be worth over $5000 before it can be claimed as an asset.

However, in other provinces such as Saskatchewan, the limit is much higher at $10,000.

Also, even if your vehicle is valued at over the limit, there is a way you can keep it.

In this case, what you need to do is pay the difference between what the car is worth and the limit itself.

Therefore in Saskatchewan, if your vehicle is valued at $10,500, you would only need to pay $500 to hold onto it and not lose it during bankruptcy proceedings.

Bankruptcy may not be your only option.

It’s smart to remember that when it comes to overwhelming debts, bankruptcy is not the only option.

For most people, it is often the last option, and there are many other possibilities to explore before you get to this point.

The good news is that our experts at are well versed in all the paths open to you if you are struggling with debt.

They are adept at assessing your financial situation and finding the solution that will fit your needs best too.

Whether that is bankruptcy or one of the many others on offer.

In fact, all you need to do is take the first step and give us a call on 1-877-879-4770 or fill in the enquiry form.

Then we can be with you every step of the way on your journey to debt freedom.

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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