Q: Can I keep my car with a lien if I file Chapter 7 bankruptcy in Arizona?

A: In a bankruptcy filing, you have no choice about which debts and assets you disclose in what all you file with the Court. You sign your several Court documents under penalty of perjury (a felony) and it's never smart to morph a money issue into a criminal case,

There are some special provisions about vehicle liens in the Code though you don't disclose enough in your post to address that.

Confer with an experienced bankruptcy lawyer in AZ about your goals, and divulge everything before you take action.

A: You can potentially keep your car but you still have to pay for it.

A: In Arizona, you can potentially keep your vehicle with a lien in Chapter 7 bankruptcy, but there are several factors to consider given your specific situation.

Arizona allows an exemption of up to $6,000 equity in your vehicle in Chapter 7 bankruptcy. If you're married, this increases to $12,000 for one shared vehicle, or $6,000 each for two separate vehicles. The exemption protects your equity in the vehicle (the difference between the car's value and what you owe), not the entire vehicle itself.

Since you're behind on your loan payments, this complicates matters. When you file for bankruptcy, your personal liability for the debt is eliminated, but the lender still maintains their lien on the vehicle—meaning they retain the right to repossess it if payments stop. The lien doesn't disappear in bankruptcy, and if your payments aren't current when you file, the lender can ask the court to allow repossession immediately.

To keep your Mustang in Chapter 7, you'll need to either reaffirm the debt or redeem the vehicle. Reaffirmation means you agree to continue making payments according to the loan terms despite bankruptcy. This allows you to keep the vehicle, but you remain responsible for the debt after bankruptcy. Even if you're current on your payments, your lender may require you to sign a reaffirmation agreement in Chapter 7 bankruptcy to confirm you'll continue making payments despite discharging other debts.

Redemption is another option that allows you to keep your vehicle by paying its current market value in one lump sum. This can be beneficial if you owe more than the car is worth, as it reduces the amount you need to pay. However, not everyone qualifies for redemption, and you'll need to owe significantly more on the vehicle than what it's worth.

Given that you're three payments behind, you should address this situation promptly. Contact a bankruptcy attorney who can help you determine the best approach based on your specific circumstances and Arizona's exemption laws.