When money is tight, skipping the car payment may feel like the only way to cover rent, groceries, or utilities. Still, stopping payments right before filing Chapter 13 can create a new problem. Once the loan goes into default, your lender may begin repossession.
Filing Chapter 13 can stop many collection efforts and may give you a way to catch up on overdue car payments. It does not guarantee you will get a repossessed vehicle back, especially if the lender has already sold it. The timing of the filing matters, as does the loan’s status. Before you miss a payment on purpose, talk with a Minnesota bankruptcy attorney about what is likely to happen in your case.
What Minnesota Bankruptcy Exemptions Protect in a Filing
Assets that fall into protected categories and are under a certain value may be exempt from your bankruptcy filing. For example, many people claim property exemptions because most people have property under the established limit. For a financed car, the protected amount applies to your equity, not the vehicle’s full market value.
Suppose your car is worth $18,000 and the loan balance is $15,000. You have $3,000 in equity. That is the amount you would compare with the available motor vehicle exemption.
As of July 1, 2026, Minnesota generally protects up to $10,200 of equity in one motor vehicle. Different limits apply to vehicles regularly used for someone with a disability, vehicles modified to accommodate a disability, and vehicles reasonably needed for a trade or business.
The exemption protects equity from creditors or a bankruptcy trustee. It does not remove the lender’s lien. You still need a plan for handling the auto loan if you intend to keep the car.
How You May Keep Your Home and Vehicle Under State Law
Minnesota’s homestead exemption may protect equity in a qualifying home. The motor vehicle exemption may protect equity in your car. Neither exemption gives you the right to stop paying a creditor that holds a valid lien.
Chapter 13 works differently from Chapter 7 because it allows eligible filers to propose a repayment plan that usually lasts three to five years. The plan may provide time to catch up on missed secured payments. You also must make the required payments after filing and stay current with the court-approved plan.
If payments fall behind again, the lender can petition the court to lift the automatic stay. If the court agrees, repossession may move forward.
What Property May Still Be Protected During Bankruptcy
Minnesota law protects several categories of property, although limits and conditions apply. These may include clothing, furniture, appliances, household goods, work equipment, retirement accounts, public benefits, insurance proceeds, and a portion of wages.
You must still list everything you own in your bankruptcy paperwork. That includes a car with no equity, an old retirement account, personal property you believe has little value, and assets you expect to be fully exempt.
Leaving property off the schedules does not protect it. An omission can delay the case, create problems with the trustee, or threaten the relief you are asking the court to provide.
When Federal Exemptions May Be the Better Choice
Minnesota is one of the states where eligible bankruptcy filers may choose between the Minnesota exemption system and the federal bankruptcy exemptions. You generally cannot take the best parts of both systems and combine them.
The federal exemptions may be more useful when you have little home equity but need flexibility to protect cash, a car, or another asset. Minnesota exemptions may be more favorable when you own substantial equity in your home.
The better system depends on all your property and debts. Focusing only on the car exemption can lead you to choose a system that creates a problem elsewhere.
How Exemptions Affect Chapter 7 and Chapter 13
In Chapter 7, a trustee may sell property that has more equity than the available exemptions protect. Many Chapter 7 cases do not involve a sale because all property is exempt or has too little value after liens and sale costs. Still, you should consider it before filing.
If you file Chapter 13 bankruptcy, there is a good chance that you can keep your property. Nonexempt equity can affect the repayment plan because unsecured creditors generally must receive a repayment amount close to what they would have received in a Chapter 7 liquidation.
Your car loan requires a separate analysis. Exemptions address the equity. The Chapter 13 plan addresses the debt secured by the vehicle. Depending on the facts, the plan may give you time to cure missed payments or change how you pay certain secured debt.
That is why a general rule such as “stop paying before you file” can be dangerous. One missed payment may reduce the time available to protect the car.
Contact Kain + Henehan Before You Miss a Car Payment
If you are already behind or expect to miss an upcoming payment, contact Kain + Henehan before the lender repossesses your vehicle. We can review your loan, payment history, vehicle value, available exemptions, and overall financial situation.
We will explain whether Chapter 13 may help you keep the car and what you should do before filing. Getting advice early gives you more time to act. Once repossession begins, your choices may narrow. Call Kain + Henehan at (612) 438-8006 or fill out the online form to discuss your options.