Indianapolis, IN asked in Bankruptcy for Indiana

Q: I am paying a car loan for a car who's engine recently blew up. Can I file bankruptcy on the loan?

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3 Lawyer Answers
W. J. Winterstein Jr.
PREMIUM
Answered

A: Any decision about a bankruptcy filing must be made from your full financial circumstances, and past, and probable future.

But about your car- warranties, whether you proceed with some form of bankruptcy relief or not.

Confer with an experienced lawyer in your jurisdiction before proceeding.

Timothy Denison agrees with this answer

A: Yes. You can.

Martha Warriner Jarrett agrees with this answer

James L. Arrasmith
PREMIUM
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Answered

A: Yes, it is possible to include your car loan in a bankruptcy filing. Whether you qualify for Chapter 7 or Chapter 13 bankruptcy will determine how the debt is handled. Under Chapter 7, the car may be repossessed by the lender unless you choose to reaffirm the debt or redeem the vehicle. If you file for Chapter 13, you may be able to keep the car and restructure the loan through a repayment plan.

If the engine is beyond repair and you no longer want the vehicle, surrendering it to the lender as part of the bankruptcy could discharge the remaining loan balance. This would eliminate the debt associated with the car, even if the lender sells the car for less than what you owe.

It's important to note that bankruptcy has long-term effects on your credit, so weigh the decision carefully.

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