For many people facing financial hardship, one of the biggest concerns about filing for Chapter 7 bankruptcy is whether they can keep their car. In North Carolina, whether you can retain your vehicle depends on several factors, including the value of the car, any outstanding loan balance, and the available exemptions under state law.



North Carolina’s Vehicle Exemption

North Carolina law allows individuals filing for Chapter 7 bankruptcy to protect a certain amount of equity in their vehicle through an exemption. As of 2024, the state provides a motor vehicle exemption of up to $3,500 in equity. This means that if the car's equity (market value minus any outstanding loan balance) does not exceed this amount, you can keep the vehicle.

If your vehicle’s equity exceeds $3,500, you may still be able to protect it by applying part of the wildcard exemption, which allows you to exempt up to $5,000 in additional assets if you do not use the full exemption for your home.

What If You Still Owe Money on the Car?

If you have an auto loan, you must continue making payments to keep the vehicle. Chapter 7 does not eliminate secured debts unless you surrender the asset securing the loan. To retain the car, you may need to reaffirm the loan, meaning you agree to continue paying the lender despite the bankruptcy discharge. Failing to do so could result in repossession.

What If Your Car Is at Risk?

If the vehicle’s equity exceeds the exemption limits or you cannot afford to keep up with loan payments, the bankruptcy trustee may sell the car to pay creditors. However, some alternatives may allow you to protect your vehicle:

• Redeeming the car: Paying the lender the car’s current market value in a lump sum.
• Negotiating with the lender: Some lenders may be willing to modify loan terms to help you keep the vehicle.

Get Legal Guidance for Chapter 7 Bankruptcy

Filing for bankruptcy can be a complex process, and protecting your assets—including your vehicle—requires careful planning. At Law Office of Calvin Craig, we provide legal assistance to individuals in Raleigh navigating Chapter 7 bankruptcy. Our team can help you understand your options and develop a strategy to protect your property.