Can You Keep Your Car in a Chicago Bankruptcy Case?

Worried about losing your vehicle if you file for bankruptcy? It’s one of the most common questions people ask before they even sit down for a consultation, and understandably so. A car isn’t just property. It’s how people get to work, pick up kids, and keep daily life running. The good news is that most people who file bankruptcy in the Chicago area keep their cars. Here’s a general look at why that’s usually the case.

How Does the Motor Vehicle Exemption Work?

Illinois law allows filers to protect a certain amount of equity in one vehicle. As of 2026, that exemption covers up to $3,600 in equity under 735 ILCS 5/12-1001(c). Equity is simply the difference between what the car is worth and what’s still owed on it.

So what does that mean in practice? If a car is worth $12,000 and there’s a loan balance of $10,000, there’s only $2,000 in equity, well under the exemption limit. In that scenario, the vehicle is generally fully protected.

What if the equity is higher than the exemption allows? Illinois also offers a wildcard exemption of up to $4,000 that can be applied to any personal property, including a vehicle, once the motor vehicle exemption is used up. Stacked together, that can shield a meaningful amount of equity in a single car.

Does It Matter if You Still Owe Money on the Car?

Yes, and often in a helpful way. A loan balance reduces equity, which means less value needs to be protected in the first place. But there’s a separate question beyond exemptions: keeping current on payments.

In a Chapter 7 case, filers who want to keep a financed vehicle typically continue making payments to the lender or enter into a reaffirmation agreement. In a Chapter 13 case, the vehicle payment (or past-due amounts) can often be folded into the repayment plan itself, which can be especially useful for anyone who’s fallen behind and is trying to catch up over time.

What if the Car Has More Equity Than the Exemptions Cover?

This is where things get more situational, and it’s exactly the kind of question that benefits from a real conversation rather than a generic answer. Depending on the numbers involved, there may be options for addressing the excess equity without giving up the vehicle. Every case looks different depending on the value of the car, the loan balance, and which chapter of bankruptcy makes sense.

Speak with Someone Who Looks at the Whole Picture

Wondering whether your own car would be protected is a fair question, but it’s not one with a one-size-fits-all answer. The numbers matter, and so does the bigger picture of your finances. Our Chicago bankruptcy attorneys at the Bentz Holguin Law Firm, LLC can walk through your specific situation and help you understand what your options actually look like. We offer free consultations, and we’re happy to talk through the details with you.

Source:

ilga.gov/legislation/ilcs/fulltext.asp?DocName=073500050K12-1001