Can you file Bankruptcy on a leased vehicle?
We are thinking about filing bankruptcy but have a leased truck that we dont want to go back. Can we file chapter 13 on that or should we just let the truck go back?
we have racked up the miles on the lease and will be paying out the a** for them and would rather not let it go back. I wish we weren’t in this predicament, but my husband was laid off and neither of us can find a job…
Posted April 14th, 2010 in Bankruptcy Q And A. Tagged: chapter 13, filing bankruptcy, job, predicament.
This is getting to be a major problem with people in bankruptcy. Two years ago, I would have told you, just reject the lease and tell them to pick it up. At that point you could go out and buy something reasonable at the end of the case. Now it getting very hard to get a reasonable auto loan after your final discharge. Neither of you are working so, you can’t file a chapter 13 case anyway . There has to be something left each month to fund the plan. I would think the best course of action is to file chapter 7 and just keep paying on the lease to keep the car. In bankruptcy, you have 60 days to assume or reject a lease i.e. car, apartment. If you don’t state if you intend to assume or reject the lease initially and just keep paying the lease, the odds are that the leasing company will never repo the vehicle. If both of you are still unemployed 45 days after filing don’t sign a reaffirmation agreement with the leasing company. Your attorney will not sign it anyway because they are attesting in the agreement that you have the ability to make the payments. As long as you make the payments the odds are very very low they will repo the vehicle. They don’t want the car back. If you don’t reaffirm the debt in chapter 7 it is discharged with all your other debts. So even if you have the car a year from now and you default on the payments, they can repo the vehicle, but they can’t come after you personally on the debt.
Tim Cook
http://www.timcooklaw.com
April 14th, 2010 at 12:22 pmThe leased vehicle is not technically an asset you can declare in your bankruptcy. You dont own it you lease it. Just take it back.
April 14th, 2010 at 12:22 pmCar Leases in Chapter 13 Bankruptcy
You car lease usually cannot be paid through the Chapter 13 bankruptcy repayment plan that you devise with your bankruptcy attorney.
You can "assume" the lease and continue making the monthly payments. You can also "reject" the lease and return the car to the creditor.
The creditor will sell the leased vehicle, apply the sale proceeds to your lease balance and then file a claim in your Chapter 13 bankruptcy case for the lease deficiency.
This deficiency is an unsecured, non-priority claim, which means you will likely only pay that creditor pennies on the dollar.
http://www.totalbankruptcy.com/overview/basics/cars-in-bankruptcy.aspx
April 14th, 2010 at 12:22 pmIn the long run, letting a truck go back won’t do as much damage to your credit as Ch 13 would. Just let it go.
April 14th, 2010 at 12:22 pmyou can keep the vehicle weather you file chapter 7 (fresh start) or chapter 13 (wage earners plan) you have to sign a reaffirmation agreement stating you wish to keep paying for the vehicle.
April 14th, 2010 at 12:22 pm